Sheepmeat forward contracts highlighted

Bob GarnantCountryman
DPIRD director sheep industry development Bruce Mullan and Agrivet Business consultant Graham Lean urged forward contracts for the WA sheepmeat industry.
Camera IconDPIRD director sheep industry development Bruce Mullan and Agrivet Business consultant Graham Lean urged forward contracts for the WA sheepmeat industry. Credit: Bob Garnant

Massive rises in sheep and wool values has drawn interest into related technologies, research and management techniques as featured at the recent sheep industry research open day at Katanning.

More than 200 visitors were encouraged by the Department of Primary Industries and Regional Development managing director of research development and innovation Mark Sweetingham’s opening account.

“The sheep industry contributes $1.4 billion annually to the WA economy,” he said.

“From 2006-07 to 2016-17, the value of sheepmeat has risen from $429 million to $551 million, up 28 per cent, wool has risen from $534 million to $826 million, up 55 per cent.

“Sheepmeat has risen from $20/head to $40/head, up 98 per cent; wool has risen from 25/head to 60/head, up 138 per cent.

“Investing in commercially relevant research and development, collaborating and partnering with industry and universities, we boost the productivity, profitability and international competitiveness of our industry.” DPIRD director of sheep industry development Bruce Mullan said the theme of the event — Farmer Wants a Life — recognised producers’ hard work to strive for a successful farm and business.

During the day-long discussions, which revolved around meat and supply, productivity and new technology and connectivity, it was apparent forward supply arrangements and contracts were essential.

DPIRD’s Sheep Industry Business Innovation project report on forward contracts said the WA sheep market functioned primarily on spot, short-term marketing, which would always have a place.

“The opportunity for greater supply chain integration — through an effective forward chain integration, through an effective forward supply arrangement and contracting system — can provide benefits to all participating along the supply chain,” the report said.

Agrivet Business Consulting representative Graham Lean said WA competitiveness in the sheepmeat industry would rely on the development of forward contracts and more cost-efficient strategies of backgrounding lambs as compared to these synergies practised in the Eastern States.

“The key to developing a sustainable market is continuity,” he said.

“I have identified key backgrounding locations in WA including the southern sand plains of Esperance, high-rainfall areas of the South West, or the Wheatbelt, although sheep do not perform as well on stubble; however, lupins are an excellent supplement.

“Ultimately, producers must know their cost of production and their target store price through a forward contract strategy.”

Sheep CRC board member Peter Trefort said the risks without forward contracts were very high.

“The largest risk is currency movement,” he said.

Lean meat yield, eating quality and meat colour were also topics at the open day.

The team of meat science experts noted yield was important; however, increases in carcase weight could reduce eating quality, which is a primary driver of consumer’s purchasing behaviours.

The open day was delivered by SIBI and the Sheep Alliance of WA.

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