Insights from the Young Beef Producers Forum at Roma
THERE is plenty of room for growth in Australia’s sheep and wool industries, with increased demand driving prices and creating a positive outlook.
For the first time in the event’s history, the Young Beef Producers Forum included presentations about sheep.
Robert Herrmann from Mecardo provided statistics on the sheep industry, showing the opportunities and challenges of sheep and wool production.
Mr Herrmann said by 2030 there will be 3.2 billion middle-class people in Asia compared to 32 million in the United States.
“(Asia) is not only going to have increased population, but increased wealth,” Mr Herrmann said. “And increased wealth brings increased disposable income.
“In the past you see developing countries go through these stages, and one of the things that happens is the consumption of proteins and fats and carbohydrates dramatically increases.”
Mr Herrmann said reports from the Organisation for Economic Co-operation and Development predict the demand for sheepmeat is going to continue to grow.
Mr Herrmann said the world’s sheep flock was increasing.
“The biggest sheep flock in the world is actually in China, by a mile, and it’s growing,” he said.
“The other sheep flock that’s growing is in Nigeria. But those two flocks aren’t likely to be exporting anything.
“The ones that count are Australia and New Zealand, the ones with the export capacity. They’re going to have an impact on the availability of sheepmeat into the world.”
Most of the world’s sheepmeat is exported out of Australia and New Zealand, according to Mr Herrmann.
He said previously New Zealand has carried more than half of sheep exports.
“New Zealand doesn’t have the capacity to maintain that, their sheep flock is low. They’ve fallen out of love with sheep and fallen in love with dairy cattle,” Mr Herrmann said.
“People say ‘the dairy industry has its ups and downs’. In New Zealand, the sheep areas have been converted to dairies and once that conversion happens it doesn’t revert.
“You can’t invest $2 million in a dairy farm and put in the type of infrastructure you need and then decide you’re going to pull out later on.”
Mr Herrmann said Queensland wasn’t pulling its weight in sheep production, with numbers decreasing significantly due to drought, wild dogs and a move to cropping.
“At the moment you have less sheep in Queensland than in Tasmania. This is the first time we’ve seen this, according to MLA’s survey data in 2017,” Mr Herrmann said.
“The sheep flock is predominantly spread through Western Australia, South Australia, New South Wales and Victoria.
“They’re the areas also where you’re getting tremendous competition for cropping. Cropping is actually taking up a lot of the hectares that had previously been used for sheep.”
Australia’s sheep population has decreased by more than 100 million since 1990.
“In 1990 we had 170 million sheep and we had 13 million hectares of crop in Australia,” Mr Herrmann said.
“Fast forward to today and we’ve got about 67 million sheep and 18-20 million hectares of crop.
“Cropping has been a big impact on wool production. In the US they would say it’s a fight for acres, and the fight for acres has been won well and truly by cropping.”
Mr Herrmann said now was the time for people to consider sheep production as export demand grew from countries like China.
At present, 57 per cent of lamb is exported from Australia and 92 per cent of mutton.
“The interest is China. China’s lamb imports have been growing. That’s not going to change, the population is growing and as their income increases they’re going to consume more meat proteins,” Mr Herrmann said.
“The mutton exports to China have been dramatically increasing over the past two years. Even though they’re a volatile importer they can step up and take the whole lot at any time. In spring last year virtually all the mutton that was slaughtered went to China.
“What we have to understand is their cooking is different to ours. Mutton which is a bit tougher goes into the cookpot and it can be cooked for longer and it’s a good source of protein and contains the flavour and at the end of the day still provides something with a little bit of texture.”
Mr Herrmann said in the long term, lamb and mutton prices would continue to improve within their normal fluctuations.
“Australia produces eight per cent of the world’s supply of lamb and mutton, but we’re the largest exporter. Because most other countries that produce lamb and mutton are consuming it themselves,” he said.
“In 2003 we were slaughtering 17-18 million lambs for 400c. Fast forward and you’ve got increased supply, 23-24 million lambs, and the price has gone up.
“Economic modelling says as you increase supply, price goes down, but the only time that doesn’t work is when you increase supply and demand increases.
“Demand is increasing, which is allowing us to produce more, slaughter more and receive more for it. That’s a really good story.”
Mr Herrmann said the outlook for wool production was also looking good.
“One of the reasons we saw sheep numbers decline was because sheep growers were disappointed in the wool prices and they moved generally into cropping,” he said.
“That has recovered now. There’s been a correction recently but I’m not going to focus on daily movements. The general position of wool is that it’s very strong at the moment.”
Mr Herrmann said premiums for fine wool were almost non-existent in the current market.
“It’s really volatile. You can see there is a long period between January 2012 and January 2017 where the premiums were almost non-existent,” he said.
“That was the result of a couple of things, farmers produce more fine wool either deliberately or as the result of a drought it automatically became finer.
“We’re seeing that now again. Even though the general wool market has improved, the fine wool premium has collapsed again. So it tells us that end of the market is quite fragile.
“So the focus for serious wool growers is to produce plenty of volume. The fine wool premium is great when it comes, but don’t build your business based on fine wool premium.”
Mr Herrmann asked the question: are sheep something that can be factored into a model business in this area again?
He said there were many opportunities for sheep in the current markets but they came with challenges.
“The challenges are: the management skills required are unique, the infrastructure required is a challenge, the dog management is a challenge, and sheep require specialist labour,”
Mr Herrmann said.
“There is the issue of getting shearers and crutchers.
“AWI is slowly working at this mechanisation that needs to come into the sheep industry. Cropping has addressed that labour issue. The sheep and wool industries are yet to do that.”
But he said the opportunities available may outweigh the challenges.
“Sheep exports available to the growing population is going to remain Australian – Australian sheepmeat and wool. We will be the drivers of that market, there are no competitors that are going to knock us around.
“In the beef industry there is South America and the US who affect what happens in the market.
“Wool is a ‘now’ product. Wool is natural, it’s renewable, it’s sustainably grown, it’s not a plastic.
“If we’re going to see a record low supply at the same time as there is this desire for people to have products that are sustainable and renewable, then it’s likely to stay strong for wool.”
The Young Beef Producers c
Forum was held in Roma, Queensland, last week. More coverage on Pages 6-7.