The economics of farming dual-purpose flock compared to lamb producing flock

Abstract

Worldwide sheep numbers are dropping, as is the consumption of sheep products. The textile industry has grown 5.2% since 2002 but wool has continued to lose market share. The consumption of sheep meat has continued to drop on a per capita basis due to the competition from grain fed animal protein. This is not the information needed to build confidence in a country known for its sheep farming.

New Zealand sheep farmers have traditionally farmed dual-purpose sheep, producing lamb for the UK lamb trade, and strong wool predominately for the carpet industry. New Zealand is the main exporter of strong wool in the world and strong wool makes up 83% of its national wool production. Current industry leaders are questioning the economics of running a dual- purpose flock producing strong wool, since increasing costs, coupled with low returns, are continually squeezing the returns. This was demonstrated quite clearly by the study carried out on the Case Study Farm located in the King Country.

The study compared the profitability of running a dual-purpose flock with a flock devoted solely to producing finishing lambs. Two main issues arose. The first was the fact that the contract cost of shearing is trending upwards. From 1997 to 2006 the contract rate per sheep has increased 50% and over the same period the wool returns have dropped 18%. The second issue was the trend that lambs sold prior to Christmas consistently provided a higher return than those lambs sold post Christmas. Between 2003 and 2006 on average the difference between a pre Christmas lamb and a post Christmas lamb was a drop of 14% in value.

A flock which producers earlier lambs is going to be far more profitable then a flock selling later lambs. This trend is likely to continue in the future therefore will it be more economic to run a dual-purpose flock or a terminal flock?

The gains made in gene testing will ensure that breeders will be able to produce sires which will be able to produce high yielding lambs. Processing companies are aware that processing a low yielding lamb costs the same as processing a high yielding lamb, yet the difference in return is estimated to be an extra $14 per lamb. In a highly competitive industry this will become an important issue in the future.

The New Zealand sheep farmer needs to look at the long-term viability of running a dual-purpose sheep compared to specialising in producing one product only. When focusing on one genetic trait, gains can be made faster than trying to focus on a number of traits thereby averaging the overall result. Most industries have specialised due to economic reality, and sheep farming in New Zealand appears to be at this crossroad. Certain other farming enterprises have already specialised into one area and found it to be far more profitable.