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Wool in the Cross Hairs. Graham Peart. Sheep & Wool Still a Major Rural Industry. Farmers 35,902 farms run sheep Income 2003/04 (export) Wool = $2.8B Meat, live & skins = $1.3B Cattle = $4.1B Wheat = $3.4B. }. = $4.1B. vs. vs. Recent Trends - Wool.
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Wool in the Cross Hairs Graham Peart
Sheep & WoolStill a Major Rural Industry • Farmers • 35,902 farms run sheep • Income 2003/04 (export) • Wool = $2.8B • Meat, live & skins = $1.3B • Cattle = $4.1B • Wheat = $3.4B } = $4.1B vs vs
Recent Trends - Wool • Sheep numbers down 49% since end of floor price (1991) • Wool production down 37% since end of floor price (1991) • Wool Micron down 0.9µm and fine wool 10% to 30% of clip • Merino Ram Sales down 41%, Queensland down 60% • Micron Premiums down from 25% to 6% (2000 to 2005) • Wool Prices down approx 40% (2002 to 2005)
Real Wool Prices & Sheep NumbersNational Average Auction Prices – Greasy - ABARE
1200 1000 800 600 (mkg greasy) Shorn wool production 400 200 0 1999/00 2001/02 2004/05 1989/90 1994/95 2002/03 1985/86 1986/87 1988/89 1991/92 1992/93 1995/96 1997/98 1998/99 2000/01 2003/04 1987/88 1990/91 1993/94 1996/97 2005/06 (f) Australian Shorn Wool Production
Australian Wool Sold at AuctionVolume by Micron – AWEX Data 2006
80% 70% 60% 19 μm 50% 20 μm Micron premium (%) 40% 21 μm 22 μm 30% 23 μm 20% 10% 0% 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2002/03 2003/04 2004/05 Micron Premiums 1995 to 2005
Stud Merino Rams sold by StateAustralian Association of Stud Merino Breeders
AWEX Wool Price Indicators (1994 to 2006)Northern Indicators for 19, 21 & 23 micron (cents / kg clean)as at 24 February 2006
Recent Trends - Meat • World Sheep Meat Production up 13% (1991 to 2003) • Australian Lamb Exports up 287% (1984 to 2005) • % of Lamb Exported up from 13% to 44% (1984 to 2005) • Lamb Prices up 56% (1985 to 2005) • Mutton Prices up 270% (1985 to 2005)
Joining Intentions (1996 to 2005) • Ewes joined dropped 7.5% • Merino Ewes joined dropped 14.3% • Ewes joined to Merino Rams dropped 22% • National Flock Merino Ewes 85% • Joined to Merino Rams – 74% • Joined to Dorest Rams – 11.7% • Joined to Suffolk Rams – 5.7% • Joined to Border Rams – 3.6% • 22 other Breed Rams – 4.9%
New Breeds • SAMMs, Dohne, Dorper, Dammara • Characteristics • New breed hype • WA study (2005) Farm Profit • Peppin Merino = 100% • SAMM = 97.6% • Dohne = 96.1% • Economic and climate - niche
Profitability of Sheep Enterprises • Merino Wethers: less profitable than ewes • Micron v Profit: 19µm more profitable than 21 or 23µm • Most profitable: high performance 21µm ewes with wethers for meat or Merino ewes 21µm 100% to meat rams • Wool-less sheep: 25% below best Merino returns
DPI Sheep Gross Margins 2006 Budgets
Sheep v Beef Gross Margins / ha1969 to 1998 GRAS Data – Wheat / Sheep Zone Long term Merino GM = $23/ha Long term Beef GM = $17/ha
Enterprise Substitution • Within sheep: move to more meat while retaining wool • Sheep to Cattle: 10yr trend, likely to end. Sheep returns similar / better. • Sheep to Crop: 10yr trend, likely to end. Machinery and chemicals pushing a return to sheep. • A 20% increase in GM$/ha needed for farmers to move
Productivity growth 1977 to 2002 ABARE 2005 1988 to 2002 ABARE 2005
Productivity Gains • 25 year figures: • Sheep Negative • Beef Fair • Crop & Dairy Good • 14 year figures • Sheep Fair • Sheep specialists Good
Options for the future • Superfine wool sheep • Good technology to drive genetic progress • Specialist Enterprise – 16 to 17µm • Expansion in high rainfall tablelands • Medium wool dual purpose • Good index selection to drive multi-progress • 19µm high fertility, heavy cutting sheep • Pastoral zone with meat finishers • Meat only sheep • Potential to save mustering and shearing costs • Yet to prove potential • Niche in Pastoral zone
Seed Stock Production • Studs mostly small • 1850’s English system to enforce breed standards • SGA to drive modern genetics in all breeds • Meat – move to composite rams • Wool – move to specialist streams bought on EBV’s
Research Needs • Motor bikes, poly pipe and B doubles – major breakthroughs. • Wool for Wealth – AWI. First major attempt to measure integrated benefits. • Little research focus on generating new within enterprise profits. • Profit focused integrated research teams needed to lift fee paying farmer’s returns.
The Future • New counter cyclical investors into sheep and wool. • Merinos to split into two major streams. • SGA to play a major role in efficient index selection. • Seed stock industry ripe for new innovative investors. • Meat to move towards composite rams. • Industry poised to lift productivity and profits.