How are global and Australian sheepmeat producers performing?

MLA - Karl Behrendt (Charles Sturt University)and Peter Weeks (Weeks Consulting Services)Commissioned by Meat & Livestock Australia

Type: PDF
Knowledge level: Intermediate

Farm Table says:

These results only use a very small subset of farms, but really interesting to see that despite our high labour costs, we still have some of the lowest cost/kg lwt. Australian farms are the most profitable in USD terms, even outperforming through with substantial government payments. Our major areas for improvement are around reproductive efficiency, lamb losses and wastage.

This report from MLA presents global agri benchmark network results for 2015. Agri benchmark is a global network and the cattle and sheep network has over 30 member countries.

The farm-level results in this report are drawn from the collection of ‘typical farm’ data in each country. In Australia data is collected for seven typical sheep farms across NSW, Victoria and WA:

  • NSW slopes; Border Leicester X Merino, Dorset; sheep + crops
  • NSW Northern Tablelands; Merino, Dorset Merino; sheep + wool + cattle
  • NSW south western plains; Merino, White Suffolk; sheep + crops
  • WA low rainfall; Merino, Merino and Poll Dorset; sheep + crops
  • Western VIC; Coopworth X Dorset
  • WA medium rainfall; Merino, Merino and Poll Dorset; sheep + crops
  • WA high rainfall; Merino, Merino and Poll Dorset; sheep + crops

The report firstly looks at global price and cost trends, sheep price forecast, world sheepmeat supply, consumption, and trade, then looks at the results in terms of whole farm productivity and enterprise performance indicators.

Whole farm profitability:

  • Australia’s ‘typical’ sheep farms were the most profitable (in USD terms), in part due to their scale and incomes received from other enterprises (crops and beef).
  • In absolute terms, and similar to 2014, the most profitable farms globally were from Western Australia (AU-7800, and AU-4800), followed by the New Zealand farm (NZ-3500) and south western NSW farm (AU-1500).
  • On average, European farms achieved a net loss of 55% without government payments in 2015, but with the government, payments achieved an average net profit margin of 24%, whereas Australian farms averaged 31%.
  • Many countries, even with significant government payments (excludes de-coupled payments), are not profitable in the long-term.
  • In 2015, all of the typical sheep flocks analyzed in Australia covered short- and medium-term costs (includes depreciation), with three of them (NSW-1500, NSW-1250, and VIC-3000) covering long-term costs
    (opportunity costs), with the remainder contributing to, but not fully covering opportunity costs. For the majority of Australian systems (excluding WA-4800 and WA-7800), this has improved from 2011 to 2015.

Efficiency of Australian producers:

  • Australian and NZ typical sheep farms are the largest by global standards, having from 2 to 8 times higher total returns (revenue) from the business.
  • Generally, Australian systems produce above-average amounts of live weight per ewe, with the exception of AU-1600, which is predominantly based on a fine wool Merino flock.
  • Australia tends to have similar ewe and lamb losses to most other regions of the world, with the exception of South Africa, Brazil, and France.
  • European farms tend to have higher weaning rates than Australian farms, primarily due to more prolific breeds in addition to nutrition (supplementary feeding) or, as occurs in France and Spain, multiple lambings.
  • It is noticeable that many countries have well over USD2/kg lwt cash costs. All Australian systems achieve cash costs of <USD2/kglwt.
  • Labour costs in Australia are amongst the highest in the world but have declined since 2013 in US dollar terms. Australia’s average wages paid for employed staff is around USD23/hr, with the opportunity cost of
    family labour around USD28/hr.
2016 - Australia - MLA - Karl Behrendt (Charles Sturt University)and Peter Weeks (Weeks Consulting Services)Commissioned by Meat & Livestock Australia
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