Price incentive for carry-over lambs to be discussed at Sheep Updates

An economic analysis of the price required to boost the production of out of season lambs will be profiled at the Department of Agriculture and Food’s upcoming Agribusiness Sheep Updates 30 August 2016.

The analysis was prepared for the department’s Sheep Industry Business Innovation project to support the sheep industry’s goal to grow supplies to secure new market opportunities.

Consultant John Young was commissioned by the department to investigate what price is required to provide an incentive for growers to produce out of season lambs.

Mr Young said Western Australian lamb supplies currently peak during spring, reflecting the low cost of finishing stock on green feed, then tail off as the season progresses and production becomes more expensive.

“To secure new markets, processors require a consistent supply through the season,” he said.

“While higher prices are offered by processors for out of season lambs, historically these premiums have not been sufficient to entice a significant number of producers to change their production systems to turn off lambs later in the season.”

The analysis concluded that a price increase of 30 to 40 cents per kilogram dressed weight (DW) was required for producers to break-even when turning off lambs one month later.

“In the Great Southern, for example, the price of lamb in May-June would need to be between $6.25-6.55/kg DW to entice growers to produce carry-over lambs instead of sucker lambs in Nov-Dec at a price of $4.50-5.00/kg DW,” Mr Young said.

“In the central Wheatbelt the breakeven price is slightly greater at $6.10-7.10. Both of these examples are higher than the five year average increase of $0.16/month observed during the period 2010-15.”

The report also notes the risks associated with producing out-of-season lambs and the market exposure to fluctuations in grain prices.

It also addresses the issue of increased carcase weights, as a result of carry-over lamb compared with sucker lambs.

“The solution may be for processors to create a stronger forward pricing mechanism to attract more growers into producing out-of-season lambs to increase the total lamb supply,” Mr Young said.

The department is sharing the report with growers and the processing sector to investigate a suitable business model to grow WA lamb production and capture new market opportunities.

Department senior development officer Mandy Curnow said the ‘Price Signals Required to Alter the Seasonal Turn-off of Lamb’ report provided a valuable insight into the WA sheep industry and what was required for it to continue to grow.

“There is growing global demand for sheepmeat, which the WA industry is in a good position to satisfy if it can build supply,” Ms Curnow said.

“The department will use this report to discuss opportunities with processors and the potential for some producers to target the carry-over market or develop feedlot businesses to meet the demand in the out-of-season times.”

Mr Young will discuss his report at Sheep Updates, Tuesday, 30 August at the UWA Club in Perth.

The theme of this year’s updates is ‘Sharpening the sheep business’ and will explore future opportunities for the WA sheep industry.

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