Sheep and wool producers are catching the sheepmeat "bug" because of high current sheepmeat prices, but Holmes and Sackett financial consultant Sandy McEachern advises producers to be cautious.

Speaking at a Leading Sheep forum at St George recently, Mr McEachern said producers are being distracted by current high meat prices but when they retreat to the average then sheepmeat won’t have such a big influence on overall profitability.

Mr McEachern said prices are currently above historical averages for meat and below historical averages for wool, but wool is still an important component of sheep producers’ income source.

"There is more variation within wool flocks in profitability than there is between enterprises," he said.

If wool producers are good at producing wool, then Mr McEachern said they should stick with it and work on ways to improve profitability.

One way of doing that is to improve production per hectare by making changes to boost the carrying capacity of the country. He suggests ways to do that may include shifting lambing time to coincide with periods when the country is likely to have most feed available or create better systems to handle seasonal variation.

If wool forms the largest component of sheep income, then Mr McEachern said producers should focus on changes that improve fibre diameter and fleece weight of the clip.

"A 5 percent increase in wool value will have more impact on overall profitability than chasing distractions such as body weight and fertility, so finding a ram source with highest fleece weight should be a priority."

Another option to improve productivity is to take a tactical rather than strategic response to the current high sheep meat prices.

"Producers can opt to change their flock structure in the short term by selling more surplus sheep and running more ewes than wethers."

"But producers need to have more resources to take this option because they require better pastures to get weaners fed for the sheepmeat market."

"It is great if producers can capture and benefit from the current high prices for sheepmeat without comprising their long-term wool agenda in the process."

Mr McEachern said whenever there is a perceived disparity in terms of profitability between meat and wool, producers move between the two.

"People see price and translate that to profit. But price isn’t necessarily a good indicator of profit because it doesn’t take the cost of production into account."

Summarising the industry’s current situation, Mr McEachern said:

a 1.5 percent decrease in cost of production is already being achieved

most gains come in increments

stocking rate is the main driver of differences in productivity

flock structure may be an opportunity

genetics, genetics, genetics – breeding direction must be focused on long-term profits

take all the fertility you can get as long as it is cheap

don’t ignore labour – the real cost of labour increases by 1-2 percent per annum, but the real cost of capital decreases with time therefore always look for opportunities to substitute labour with capital.

Mr McEachern’s presentation at the Leading Sheep forum was adapted from the Eyre Network progam.

For more information on Leading Sheep activities, contact Geoff Knights on geoff.knights@dpi.qld.gov.au or call 07 4620 8121.