It's pretty obvious for a lot of agriculture that costs are rising quicker than the increases in commodity prices. It is a classic cost price squeeze. Everybody in the supply chain is feeling the heat and the lucky ones can pass it on down the chain.
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Others like producers generally have to wear the pain, and just produce more product for less cost. The only real negotiating power producers' have ever had, is to withdraw supply by going out of business.
Around the sheep industry at the moment I see people making that call. Anybody with sheep and cattle are doing the sums, and at the moment cattle are winning the gross margin battle pretty comprehensively.
Labour shortages in the shearing industry during COVID-19 and a serious contraction in marketing options has accelerated the move out of sheep in my neck of the woods.
Government officials, unnecessarily mandating $2 tags in an industry that measures profitability in cents per dry sheep equivalent certainly doesn't help.
The cost of a cattle tag can be amortised over a lot more kilograms of product compared to the gold-plated sheep proposition. The cattle win on that cost comparison.
The lack of marketing options for sheep in the north of NSW is seeing producers wary of inherent marketing risk in sheep operations. The cost of processing sheep and cattle in Australia is among the highest in the world but again sheep are more expensive per kilogram of product.
The demonisation of operations like mulesing has certainly played a role in the exits. Flystrike and the double crutch on unmulesed sheep are another built-in cost for producers chasing woke markets.
An aligned issue is that unmulesed sheep producers have overused some of our valuable chemicals making them useless for strategic use on professional commercial operations.
On a positive, I see with some satisfaction the premium for unmulesed wool is collapsing. Hooray! at last someone has convinced some in the market that mulesing is actually an ethical and sensible choice.
Ovine Johnes disease (OJD) is creeping into a lot of NSW. It is a $3 a head vaccine, another nail in the coffin. Barbers pole has always been an issue in New England, but the cost of dealing with it is labour intensive and thus is costing an unsustainable amount.
Parasite management in cattle is way less per dollar of product. We also see emerging diseases like bluetongue and eperythrozoonosis ovis causing productivity issues in sheep.
A break in the wool and a fever in rams can cause some serious grief to the bottom line. It appears research and development corporations have lost interest in sheep diseases.
Unmanageable disease challenges are chipping away at margins in the sheep industry. I am a self-declared wool tragic, but unless we see a bit of effort from some of our industry bodies on costs I will be turning the lights out on the sheep industry in New England.
- By James Jackson, sheep and cattle producer from Guyra and former veterinarian.
