Adversity brings opportunity with Merinos

Through the challenges of 2020 Merinos still present top opportunities for producers

Wool
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Continued demand for Merinos can be broken down to strong markets for both wool and meat.

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THE year 2020 has thrown up many challenges for farmers - fire, drought, floods, a pandemic, but with adversity comes opportunity and this year there have been plenty of the latter for Merino producers.

The challenging year has highlighted the resilience of the breed with meat markets solid throughout and the wool market now rebounding well.

Improved seasonal conditions across much of the eastern states and Queensland turned the situation around for a lot of livestock producers, although it was a different story in WA and buoyed by a strong market, sheep sales started to climb.

The interstate market provided a valuable turn-off opportunity for WA farmers as producers in NSW and Victoria looked to rebuild flocks, with over 1.5 million head sold interstate in 2020 (Jan-Oct).

The latest AWI/MLA sheep survey indicated that WA has the nation's largest breeding ewe population, 97 per cent being Merino ewes.

But according to Elders WA, by the end of the year an estimated two million head of Merino ewes will have left WA for the interstate market in 2020.

In WA recently, young Merino ewe breeders sold for over $230/head while in the east, recent Merino ewe lamb prices have ranged from $140 - $226/head, while young breeders fetched up to $330/head and older breeders up to $290/head.

While prices for Merino ewes remain high, Rural Bank Chief Operating Officer Will Rayner said farmers should still consider them as an excellent investment opportunity.

"We are certainly seeing some strong prices for Merino ewes, which can be off-putting to some sheep producers trying to restock," Mr Rayner said.

"When you factor in the current low interest rates and the amount of green feed available in many areas, investing in Merino ewes continues to represent a sound business strategy for many producers.

"Particularly if you were looking from a comparative point of view, Merinos are an adaptable breed when it comes to weather variabilities.

"If you look at them as a hedging tool, they are providing a solid investment with the flexibility to manage risks and cash flow variability."

Elders Stud Stock Specialist and District Wool Manager Scott Thrift said Merino wether lambs presented a good opportunity for growers looking to generate profit to secure the more expensive Merino ewes.

He said many of his clients had opted to invest in Merino wether lambs sourced from WA rather than outlaying for ewes and it had been worth their while.

"We're looking at a potential profit of $30/head on a minimal investment with Merino wether lambs, which is very handy, especially when you are recovering from drought," Mr Thrift said.

"I think the demand will be ongoing so there is opportunity to get numbers back on the ground, it will take a while to rebuild but when you can make 25-30pc profit it certainly helps."

The continued demand for Merinos can be broken down to strong markets for both wool and meat.

This year, many woolgrowers have also taken advantage of the fact wool is easy stored and non- perishable, allowing for risk management.

While worldwide retail demand has been impacted by COVID-19, the demand for Merino wool as a renewable, natural and biodegradable fibre is increasing.

This year has seen the launch of the Woolmark consumer campaign in China, a market which processes 80pc of Australian wool, with half of that ending up in the Chinese retail market.

Woolmark's Country Manager in China, Jeff Ma, said the young Chinese consumer was more aware and health-conscious when it came to retail apparel, potentially a big advantage for Merino wool.

"Young Chinese consumers are definitely more health and environmental conscious about their purchase and I see that this is a wise space for Australian Merino wool to occupy and to play us on a higher ground as a sustainable fashion country and to keep conveying the message of merino wool being natural, renewable and biodegradable to Chinese consumers and giving them more reason to choose Merino," Mr Ma said.

Mr Ma said despite market and supply chain setbacks due to COVID-19, the yarn market was now in recovery and Chinese textile mills were focusing on driving domestic market demand, while trying to capitalise on the thriving e-commerce sector.

Digital retail sales account for 25pc of total retail sales in China, with that figure expected to continue to grow rapidly within the next three to five years.

He said the demand for sportswear was strong and again, the health-conscious consumer prioritised sustainability and eco credentials.

"Based on all the facts, all the data our economy, our retail, our exports I think we are indeed very optimistic about the market going forward," Mr Ma said.

"The Chinese people are very optimistic and working very hard it is really about how quick and agile we adapt to the new change and put in place the best approach and strategies at the trade level, on the R&D level and on the retail marketing level to accommodate the new demands and needs of the Chinese consumers."

The story Adversity brings opportunity with Merinos first appeared on Farm Online.

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