Price stability is vital

Neridup farmer John Wallace believes that while the agriculture industry has a positive outlook, processors and marketers needed to be constantly mindful of the on-farm cost of production and the importance of price stability.

Mr Wallace, who runs a mixed farming operation with Merino sheep, 280 cows and a cropping program, said growers needed to be confident that commodity prices covered the cost of production.

He said forward contracting options were critical to business planning.

"Processors, particularly in the sheepmeat and beef industries, must provide greater market signals to growers or risk losing producers to the grains industry," he said

"Since the Harvey Beef acquisition by Andrew Forrest's Mindaroo, there was been some positive sentiments in terms of that company forming relationship with producers and setting contract prices," he said.

Cattle prices had also risen over the past five to six months but before this the market had been very lacklustre, he said.

"In all reality, if you sit down and analyse the real cost of production, including lost opportunity costs for hay and other feed, we haven't been making money out of beef for 10 years," he said.

He said market signals and forward contracts allowed growers to ascertain whether it was worth producing meat or growing a crop.

"Realistically, beef needs to be $3/kg before growers start to make a profit," he said.

Mr Wallace said he believed the free trade agreement with China would do more for growers in the Eastern States than in WA.

And he said while China remained the only major importer of Australian wool, this industry would continue to struggle with profitability.

"The Chinese are now basically the only major importer of our wool, so they control the price of our wool," Mr Wallace said.

"I'm far more confident in the future of sheepmeat than wool simply because there are a lot more players … and sheepmeat probably has a more bullish outlook than beef."