It has been three years since we looked at shearing costs, beer and wool prices. The lift in shearing costs caused by the pandemic is now being felt in farmer production reactions to the combination of higher labour costs and cyclical low wool prices.
The January 2022 article (see article here) noted a lack of useful shearing cost data. ABARES collect survey data on a range of farm costs, including a combined shearing/crutching costs, however there is a problem in the data as the per animal cost only increases by 71% between 1998 and 2023, when the award rate for shearing rose by 202%. Benchmarking data for shearing/crutching costs provided by John Francis at Agrista (see here) increased by 192% for the same period. Historically, the award rates for shearing were a solid guide to costs but during the pandemic actual shearing rates rose well above the award rate. This point is made to highlight a lack of good data to underpin the discussion the industry needs to make about productivity. Data has been collected from a range of sources in an effort to reflect shearing costs of the past five years.
Figure 1 shows indices for beer and the award shearing rate, based on 1987 and running through to 2025, with an extra shearing series showing the more likely effective shearing rate of recent years. The award shearing rate lost ground to beer from the late 1980s and still remains well below the beer index. The shearing index based on anecdotal feedback shows the shearing rate to have matched the beer index in 2020 and then exceeded it, before slowly working its way back to match the beer index from 2022 as the pressure to find shearers subsided.
While acknowledging the caveats about the anecdotal shearing cost series, the series shows the cost shock to the wool industry between 2018 and 2022. During this period, the costs of shearing rose by the best part of 50%. At the same time wool prices entered a cyclical downturn. The combined effect is shown in Figure 2 which expresses an estimated full cost of shearing as a ratio of a clean kilogram of the average merino fleece price, from the late 1960s onwards. The full contract shearing cost has been calculated assuming it is 2.25 that of the actual cost of shearing a sheep.
In 2018-2019 with high wool prices, the ratio for a full cost of shearing to the merino fleece price fell to 30%. Then as the cost of shearing rose and wool prices fell, the ratio increased to levels not seen during the past 60 years. It is currently tracking around 87%. The ratio has swung between extremes as the wool price ranged from high to low and back again over time. By comparison, the rolling eight-year rolling average has generally been in the range of 50% to 55% since the early 1990s, which means it normally costs around half a clean kg of wool to shear and crutch a merino. At the moment it costs the better part of a clean kg of merino wool.
What does it mean?
Labour, meaning the finding, paying for and keeping of, has become more difficult in recent years in regional Australia. The shearing cost graphs are a tidy way of illustrating the big increases in costs seen in recent years and help explain why wool (which has extra labour requirements) is struggling to compete for farm resources.
Key Points
- Shearing costs remain high, after increasing markedly during the pandemic.
- The effective shearing cost is not on par with the long term ABS beer index.
- Shearing costs when compared to the price of a clean kg of merino wool are at six decade highs (aided by low wool prices)
Click on figure to expand
Click on figure to expand
Data sources: ABS, FWC, SBTM, AWC, WI, AWEX, NSW DPI, Complan, ABARES, Agrista, ICS, Mecardo
