Sights set high for State's flock

BOB GARNANT and KATE POLLARDCountryman

WA's sheep flock is on the up. By size, it is up a modest 2 per cent on last year across all breeds - meaning in 2013 there is about 14.7 million head. In comparison, the nation's flock sits at around 74.4 million.

At the same time there is a distinct buzz of optimism for the future of the industry among producers, live exporters, wool representatives and processors who gathered at recent industry updates.

After the high prices of 2010 and 2011 and crushing blows of the past 18 months, it's time there is some good news supported by numbers and the season is looking up for many after a record dry June.

Kojonup producer, and head of the group charged with a sustainable future for the WA sheep industry, Rob Egerton-Warburton is cautiously optimistic about the industry's future. The Sheep Industry Leadership Council chairman said industry had adjusted to work with the current sheep numbers but that it needed work together to regroup and rebuild the flock after recent tough seasons.

He added that lambing conditions in the South West had been kind, and warm conditions meant reasonable lambing percentages

WA producer co-operative WAMMCO has just announced a dividend record of $1.8 million to return to its 2000 producer members.

Co-operative chairman Dawson Bradford said the record return was built on exports of mutton in the first half of 2012-13 and strong sales of lamb to North America, the Middle East and China in the second half.

He knows only too well that the industry is not out of the woods - with the dividends being brought forward from December because of the "rapidly escalating economic and seasonal difficulties confronting sheep and lamb producers in WA".

But he was quick to add: "For the first time since WAMMCO was formed under highly testing circumstances nearly 15 years ago, I think we can say the co-operative is now well positioned to reliably and effectively serve the future interests of its members."

Further to this, Mr Bradford said a forecast of five million fewer lambs to be traded around the world this year would help stimulate prices.

According to Meat and Livestock Australia market information and analysis manager Tim McRae, Australian lamb stocks will tighten significantly over the next couple of months.

"This is due to large turn off of lambs so far this year, with many lighter weight lambs going to the Middle East and larger lambs being taken by the US, China and the domestic market, leaving a shortage of supplies for the remainder of 2013, " he said.

"The large sheep slaughter seen in the 2012-13 fiscal year will likely reduce lamb supply in the longer term as flock rebuilding efforts have been stalled on the back of poor growing conditions throughout the 2012-13 season."

Mid to longer term demand for sheepmeat is expected to grow in the Middle East and China, in particular, according to Department of Agriculture and Food WA researcher Kimbal Curtis.

"The Australian flock is near a 50-year low, with limited prospects for a further sell down, " he said.

Mr Curtis said while sheep prices may be down on the high levels of 2011, the over-the-hook prices (quoted to May) for heavy lamb and mutton, were still above the 60th percentile for the past 10 years.

"From the middle of 2011, both lamb and mutton indicators have fallen sharply at annualised rates of 116c/kg carcase weight for heavy lamb and 113c/kg carcase weight for mutton, " he said.

"In the second half of 2012 sheep prices in WA decreased substantially for all classes of sheep.

"At the time, the decline was generally attributed to the introduction of the Exporter Supply Chain Assurance System and its impact on live exports; however, prices were falling before ESCAS and the situation was more complex."

Mr Curtis said prices started dropping in eastern Australia as dry conditions returned and producers sought to reduce numbers.

"This had a flow on effect to WA, further compounding this was the effect of the high Australian dollar and competition in Australia's traditional export markets from other suppliers with product in excess of what they can sell into their usual markets, " he said.

"Lamb price remains above the 50th percentile (that is, above the median price) and wool is around the 80th percentile."

While the 2012-13 wool selling season failed to hold up after the two previous exceptional years, it remained well above all others except 2001-02.

"The Eastern Market Indicator started the 2012-13 season at 1077 cents/kg clean, fell through the first two months to a season low of 927c/kg in mid-September before recovering to reach a season peak of 1138c/kg at the start of February.

"It then bounced around the 1000c/kg mark, closing at 1047c/kg, " the National Council of Wool Selling Brokers executive director Chris Wilcox said.

Mr Wilcox said the season average EMI was 1035c/kg, which was lower than the 2010-11 average of 1129c/kg and the 2011-12 average of 1198c/kg, but well above all other years since 1990-91, with the exception of 2001-02 when it averaged 1067c/kg.

Nonetheless, the longer term outlook for the wool industry was positive, with ABARE forecasting a 12 per cent increase in the EMI for 2014-14 and a 4 per cent increase in 2016-17.

Primaries wool manager Tim Chapman told producers at the recent Sheep Updates that supply nationally was increasing slightly and there was increased demand from the US and Europe, including the Czech Republic.

Growth was also being seen in India, South Korea, Vietnam and Russia.

A new wool processing plant in Malaysia, due to open last month, would also be a big benefit for buyers out of WA, Mr Chapman said.

"It will provide cost savings which could be passed onto growers, " he said.

In the long-term, the industry is still very positive but markets have been, and will continue to be, very volatile.

To help protect clips, Primaries wool manager Tim Chapman said growers needed to consider all marketing options including forward contracts.

While the live export side of the sheep industry has taken a battering of late, industry representatives are optimistic about increasing trade to existing and new markets and the possibility of simplifying ESCAS.

Australian Live Export Council chief executive Alison Penfold said Bahrain and Saudi Arabia could take upwards of 1.5 million sheep from WA and she listed Iran, Egypt and Turkey as other market opportunities.

Ms Penfold said being competitive is important but so too is being able to supply high-quality healthy sheep that have been handled and looked after according to international standards. Australia's ability to do this was also giving producers and exporters a competitive advantage.

Get the latest news from thewest.com.au in your inbox.

Sign up for our emails