Are current sheep prices the new normal?

High sheep prices are here to stay, for the short-term anyway

Sheepmeat
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Experts say stocking up on sheep is still a good investment despite the high prices.

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The recent devastating drought forced a massive de-stock of sheep enterprises, taking the national numbers to historical lows.

But with an abundance of feed across the eastern seaboard, graziers are busy restocking, and paying prices far exceeding anything the industry has ever seen before.

So are sheep still a good investment and should the industry get used to the high prices?

According to Director of Aggregate Consulting, Sandy McEachern, sheep remain a good investment especially when it is your expertise.

And he has told producers to get used to the high prices, for the short-term anyway.

"Sheep producers are facing a new level of pricing for livestock," Mr McEachern said.

"People expected they (sheep) would be expensive coming out of such a long drought, but nobody could have predicted where the prices could get to."

But considering the low national flock numbers and the amount of sheep coming over from WA, which is expected to reach over two million by the start of 2021, although stocking up on sheep is a smart move, producers need to be strategic.

"There is more feed on the eastern seaboard than we are going to eat. No one could get enough stock to eat what is in front of them," Mr McEachern said.

"Producers need to think more strategically where they need to be when recovering those numbers.

"Not many farms came out of the drought fully stocked and all the numbers tell you the key to rebuilding is to rebuild as quickly as possible, cash flow allowed."

He said although the abundance of feed allows producers to feel compatible with any increase in numbers they can find, the downside is for anyone that does have sheep to buy, they are going to be expensive.

First-cross ewes are approaching $500 plus, and a young Merino ewe cant be bought for under $300 anywhere in the nation.

Given where wool is trying to get back to and the current lamb prices, sheep as a good investment feel like it could face an uphill battle.

Mr McEachern admitted when weighing up an alternative, such as cropping, the biggest issue would be the cost of getting into business.

"If you are going to put in a hectare of livestock at 10 dry sheep equivalent (DSE) to the hectare, you will start to approach an investment of $1000 per hectare of capital, not to mention any pasture work in that as well," he said.

"Livestock is a far more expensive way to go, so if you are cash strapped I can see why people lean towards putting in more crop in the interim.

"That is what will save cropping in the short-term; the total capital requirement to get into cropping is so much less then to buy a hectare of livestock."

But he strongly advised sticking to what you know best.

"If your core expertise is sheep, definitely lean towards returning your stock numbers as quickly as possible rather than putting in more crop," he said.

"Most data says cropping is for the people that do it well and sheep are for the people that do it well.

"Core expertise is important and knowing what you do well is important, so definitely where it is your core enterprise you have to favour getting back there as soon as possible."

But there are other options for producers out there that don't have the cash reserves to buy in the stock they want.

Mr McEachern suggests retaining older ewes for another year, getting more ewes into the system at a younger age, and holding on to wethers.

"Going and buying extremely expensive sheep is not the only option," he said.

"But when buying sheep in, younger sheep seems to be better value than older sheep.

"This is because at least you've got five years to amortise that initial cost.

"I can understand why the prices are getting where they are, generally speaking I don't think we have overshot by too far yet, but that's all premised on the fact the commodity prices that we have got.

"Wool and lamb and beef are going to stick around for a while, somewhere near these current levels."

According to Elders livestock agent, Russell Mr McKay, Katanning, WA, the price for ewes would be even higher if the wool market didn't take the dive it did in 2020.

"Look at the money we are getting now....where would we be if wool was still at $16 or $18 a kilo and lamb was at $9 a kilo? I don't think you would buy a ewe in WA under $350," he said.

"With the eastern states having the great year they are, and wool and lamb prices were still where they were, then people wouldn't be able to buy sheep because the industry would be just too good."

And he warned producers to get used to paying a lot more money for a ewe.

"Both the sheep and beef industry are killing more females than they are breeding," he said.

"These people that want to be a prime lamb producer, they have to get a mum from somewhere because they wont get a lamb without a mum.

"They had better get used to paying a lot more money than what they are paying now."

He said sheep are still a top investment.

"You can pay $250 by the time you get a ewe home, but you can turn around and get four or five lambs out of her, four or five wool clips and she is still worth $120 when you turn around to get her head cut off," he said.

"Can somebody else tell me a better investment than that."

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