Some record gross margins for wool & lambs


Last week we had a look at the Agriculture Victoria Livestock Farm Monitor Project (LFMP) in terms of how cattle producers have performed in 2021-22. This week we take on sheep and wool, with some record results in some parts.

Most sheep producers, whether they focus on wool or lamb, will tell you that 2021-22 was a pretty good year.  The LFMP, which conducts a very detailed survey of 124 producers across Victoria confirms the good year for most enterprises, with a few exceptions.

Figure 1 shows that Victorian Sheep and Wool producers had much better than average years, except for lamb producers in Gippsland.  The improvements in real gross margins ranged from 23.5% better than average for Gippsland Wool, to 91% better for Northern Victorian wool.

Gippsland gross margins for lamb performed 18% worse than average.  The small number of lamb producers surveyed in Gippsland have always performed well, with the best gross margins per hectare of all enterprises.  The last two years have been below average, with lamb income per hectare being the driving factor.  A change in participants would explain the difference, or it might be an ongoing impact of the fires in early 2020.

Western Victorian lamb producers had their best year since the heady days of 1973-74 (Figure 2), with their gross margin up 8%.  It was the third big year in a row for Western Victorian lamb producers, with margins outstripping wool by 43%.  We need to be a little careful with such comparisons, as ‘Western Victoria’ covers areas from just south of Horsham to just north of Portland. 

The variation in annual rainfall is from around 400mm to over 700mm, with more wool producers in the north, and lamb in the south.

In Northern Victoria and Gippsland, gross margins are much closer between lamb and wool.  Northern Victorian wool producers had their best year since records began in 2004-05, outstripping lamb margins, which just missed out on a record.

What does it mean?

It will be interesting to see how the weakening lamb and mutton prices impact gross margins this year.  In Western Victoria, we have seen six years of elevated margins for sheep and wool producers, which are likely to come to an end of some sort.  Costs haven’t fallen, but belts are likely to be tightened to maintain profitability.

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Key Points

  • Victorian lamb and wool producers had another good year in 2021-22 with records set in some regions.
  • Lamb margins were better in Western Victoria, but enterprises were even in other areas.
  • Weakening sheepmeat markets will impact profitability this year.

Click on figure to expand

Click on figure to expand

Click on figure to expand

Data sources: AgVic LFMP,  Mecardo

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