PROCESSORS might have to look at paying more to encourage out-of-season slaughter weight lambs as producers battle increased costs brought on by challenging seasonal conditions, the 2024 BestWool BestLamb conference in Ballarat heard this week.

There were also concerns about the implications of the current low rainfall-induced higher cost climate on future lamb production levels and ewe flock retention, and lack of industry messaging, to ensure strong sheep meat demand is met.

Dunkeld prime lamb producer Matthew Crawford asked Agrista director John Francis, with his experience with benchmarking, for an estimation on what it is costing producers to meet changing market specifications.

Mr Crawford said lamb market specifications from processors have changed over the last decade.

“A good lamb used to be 18 kilograms (cwt), now it’s 22 (kgs)

In that 150 days (of the growing season) if you a week’s weight gain, it’s hard to hit 18kgs on 80 percent of your lambs,” he said.

He said in terms of cost of production, anything producers do outside of the Spring growing season added significant cost.

“Lambing earlier adds costs, holding lambs later adds significant cost,” he said.

“Do you suck up the costs or do you have a cost of what that extra two kilograms is adding to our cost of production?”

Mr Francis said he though prime lamb businesses were some of the most challenging to operate because “one chink in the armour” drops them out of the targeted market category and into a high cost business.

“I think you’ve got to do your partial budgets and understand whether you can achieve that (target weight).”

Mr Francis said producers had to “cop it” in some years.

“You win some you lose some, every benchmarking meeting I go to I have a fight about this, so I won’t have an easy solution for you.

“But I do think a lot of the processor cost is being pushed back onto you (producers) and I do think that what was previously a 16kg acceptable animal went to 18, went to 20, has gone to 22,” he said.

“There might be a point where they have to pay us a lot more for us to deliver what they want, because at the moment I see a bit of a mismatch and I think you’re right, there is not many people achieving a $4 or $4.50/kg cwt (cost of production).

“And you’re right that goes up with other costs in your business that aren’t delivering any value,” Mr Francis said.

“So my view on your question is, do a partial budget from the point that you are (at) and establish what the marginal value is of putting the extra 2-4 kilograms on, and what the marginal cost is.

“But factor in, if you’re at optimal stocking rate you are flogging feed from something else, that would be the most important point for me and I think that’s the bit that is often missed – I’ll carry them on, but I won’t acknowledge the fact that I’m flogging that feed from my ewes which is setting up my next production cycle.”

After his session, Mr Francis said the partial budget was necessary for producers to understand what price they would need to justify extra cost to meet a market lamb weight requirement.

“And there are plenty (of producers) at the moment that are accepting a price that is less than their cost of production.”

But Mr Francis said rather than pushing the issue toward processors, although their prices were part of the issue, producers should take the control that they have to drive the cost of production down to make sure there is a margin. Although Mr Francis suspected that profit margin is narrowing in the current seasonal and feed cost conditions.

“So at some point you make a decision that it is too narrow and I will go somewhere, I’ll do something else with the land, go to an alternative enterprise.”

However, Mr Francis said moving to another enterprise can also be costly.

“My view would be you might be better off staying in your own (enterprise), but in order to do that probably you need to know your business well enough.”

He said the first step is working out actual and targets for kgs of production/hectare and cost of production.

“Then work out what can be improved in your existing business because it will be far lower than changing the whole enterprise.

“Rather than just jumping ship, stop, review and think well, are they anomalies, we just learnt that they were,” he said.

He said wool or lamb lambs producers should look at their businesses and work out what they can do within that enterprise, rather than moving into another.

“Because if you have a look at our benchmarking data, most of the (cost and return) variation is within enterprises rather than between enterprises over the long-term.”

Mr Crawford said at some point if producers are going to be producing lambs at preferred weights outside the growing season “at some point the price will have to be more.”

He believed producers needed to send clearer message to processors about what prices is necessary to justify producing lambs at certain weights outside the growing season.

At the moment, processors can buy plenty of lambs so there was less need for higher price signals, he said.

“If you do your sums for that 150 day growing season, even if you put 300 grams a day on lambs — and not many producers are doing 300 gms over 80pc of their lambs – so what we are actually doing is incurring cost by lambing earlier and trying to extend that 150 days.

“So I think the bigger issue is the discount for that 18kg lamb.”

Mr Crawford said producers are being lured into spending the money to achieve lambs meeting market specifications.

“I think this year we didn’t have a choice, but as a general rule anything we do outside the growing season is going to add cost, but are we going to be rewarded for that cost?”

Looking forward, Mr Crawford believe fewer producers would be willing to add cost to their operations to produce lambs of market weight outside the growing season.

“The processors have actually got to decide do they want those heavy lambs earlier and (in terms of price) and how much do they want them?”

Mr Crawford conceded that the price offered for 20kg-plus lambs have often been shy of levels profitable to many producers.

He said most of the year the price offered “had a 6 in front of it” and producers with a cost of production of $4.50/kg were in the top 20 percent whereas the average was around $6.50/kg.

“So if you are an average producer you are selling at a loss.

“A 7 won’t give you a 3pc return.”

Signals needed to retain ewes and lamb production gains

JT Agri-Source director and BestWool BestLamb chair Jason Trompf said with seasonal conditions this Autumn, coming of the back of good reproduction rates last year, there has been a sustained flow of lambs.

“And that flow of lambs, if we had had an earlier break, would have been steadied up; producers would have worked on finishing lambs to higher carcases weights.

“But in the absence of that break, I think the processors had plenty of lambs coming at them and the need to go out with a more positive price was not there,” he said.

“The challenge is the repercussions of that.

“The short-term implication is that many lambs have been sold at lower carcase weights and most likely there will be a real shortage of lambs in say, mid-August.

“And normally that August mid-September (supply) gap is filled by early suckers and one of the home of them is South Australia, parts of which are having super-challenging seasonal conditions and northern Victoria is as well,” he said.

“So therefore you are going to have a double whammy shortage of supply in that period.

“But I think the bigger picture opportunity that would be supported by a positive price signal is what people are doing with their next crop of lambs and how many ewes they are retaining to join,” he said.

“The last 12 months has been a big adjustment for sheep producers; they have come off a series of good seasons, many sustained years of good prices, but both things have turned against them, along with interest rates and several other factors.

“It’s put the pinch on a lot of sheep producers and I think the industry really needs to consider the implications of the ewe base,” Dr Trompf said.

“I can see us running ‘It’s Ewe Time’ forums in 2025 because we are going to run low on the ewe base, with Western Australia’s challenges, New South Wales’ season that was but was forecast to be wasn’t.

“I think a lot of ewes will have their lambs weaned early in South Australia and Victoria this year and with the mutton trade up and about our ewe numbers will be really compromised,” he said.

“Then you are tasked with this challenge of having adequate reproduction, and reproduction efficiency that enables you to simultaneously sustain the flock to grow it and grow the number of lambs supplied to the trade.

“We’ve been able to do that in the past, but it’s really challenging and relies on two or three good seasons in a row.”

Dr Trompf said the Spring this year was not what was hoped for and he had dire concerns for where Australia’s ewe flock could end up by 2025.

“In mixed farming zones, I am concerned about the sheep industry having a massive loss in the battle for acres, and what may happen is, with the mutton (price) schedule looking pretty good, farmers get out of their ewes, finish one of their last crops of lambs and by the time you get to the end of this season quite a few more mixed farms might have no sheep right across big parts of Australia.

“The other things that is going to happen is that ewes that have lambed and lost their lambs because of the pressure on the lambing paddocks they will get pulled out at lamb marking and in a lot of cases go straight on the truck,” he said.

“So I just think people are going to try to drop that adult ewe that can take a fair bit of feed out of the paddock, on any excuse they will be put on the truck because the (price and cost) signals over the last six or 12 months haven’t been positive.

“That’s coming back to the original point; if we had a positive outlook throughout this Winter, I think farmers would have a different mindset going through this phase,” Dr Trompf said.

“Whereas at the moment, for many, they might see a late price spike, will have played all their cards, their rams will have gone and I’m worried about their mindset on where they are heading with their sheep flock.

“There hasn’t been those (market and industry) leadership signals on a range of fronts – pricing, future opportunities in sheep, future demand signals in 2025 and beyond,” he said.

“There has just been a lack of a voice about the great future that exists, in the sheep meat industry in particular.

“I just feel we’ve got do a better job in supporting the everyday sheep producer to deal with current circumstances but also have an eye for the future, and I think this will turn really quick and it’s the farmers that can get their way through the trenches and have a productive base in a productive state for next year that will be able to really capitalize on that.”