Why Western Australian woolgrowers should stay with wool

The WA wool industry is currently facing significant challenges, including low wool prices, reduced returns, competition for land use from cropping and meat production and legislation passing federal parliament last year banning live sheep exports by 2028. Just to name a few. Given these challenges, it's no surprise that many WA woolgrowers are considering moving away from wool into other livestock enterprises or becoming a cropping-only enterprise. However, despite these difficulties, there are compelling reasons why WA woolgrowers should remain in the wool industry and focus on improving their current operations rather than abandoning them for perceived greener pastures.

Think Before You Leap

Before making any decisions to exit wool, it’s important to first consider the potential profitability implications of switching enterprises.

AWI recently commissioned John Francis, Director of Agrista, to investigate and compare various farm enterprises against wool sheep to assess their relative performance. You can access the full report here.

The Case for Staying with Wool

Switching out of wool may seem like a quick-fix to improve enterprise performance and increase profitability, but many woolgrowers might find themselves trading one set of challenges for another. If you move from being an average woolgrower to being an average producer of any other enterprise, you're likely to be disappointed with the results.

Each year, livestock enterprises experience fluctuations in profitability, driven by factors like seasonal conditions, cost changes and price shifts. Some years, you might be lucky, while other years can be less forgiving. However, when you step back and look at long-term results, the annual variations start to fade and a clearer picture emerges. 

Agrista’s enterprise comparison data suggests that switching enterprises is unlikely to significantly increase profits. The study found that improving performance within an existing enterprise is often a more effective way to boost profitability. The comparison data covered various livestock breeding enterprises, including beef breeding herds, dual-purpose sheep flocks, prime lamb flocks and wool flocks. The findings also showed that specialist wool enterprises have delivered similar or superior profits compared to the alternative enterprises.

Consider the Costs of Changing Enterprises

Before deciding to change enterprises, it’s essential to factor in the costs and challenges associated with making the switch, including:

• Skill development: It may take time to develop new skills, and there could be a performance lag as you transition to a new enterprise
• Infrastructure and machinery: Investments in fencing, equipment and other infrastructure will be required
• Genetic investment: To get a new enterprise up and running, you'll need to invest in genetics
• Capital value differences: The value of assets in your current enterprise may not align with those of a new enterprise

Given these significant costs, woolgrowers considering a switch should first assess their current enterprise's performance. This approach allows for an objective evaluation of where improvements can be made before considering any major changes.

Why Stay in Wool?

Comparable returns: The results from the Agrista study indicate that over a five-year period, average profits per DSE across various livestock enterprises were very similar.

The key difference, however, lies in the top 20% of woolgrowers, who achieved far higher profits than average woolgrowers. This suggests that striving for excellence within a wool enterprise can be more profitable than switching to another type of livestock enterprise.

Wool is resilient and provides flexibility: Wool enterprises are more resilient in the face of drought than meat-producing enterprises, as the sheep have lower maintenance energy requirements and can still produce wool during dry periods. This means income reductions during droughts are generally lower compared to meat-based enterprises.

Additionally, wool enterprises offer multiple income streams, including wool and sheep meat. This flexibility allows woolgrowers to adapt to market signals, resource availability or management preferences, making wool production more adaptable than meat-focused operations.

While the wool industry may experience short-term fluctuations, an efficient wool enterprise can be stable and profitable over time. 

Practical Steps for WA Woolgrowers

Rather than abandoning wool, take a step back and explore opportunities to improve your existing operations. Have you assessed the following?

• Financial performance per dry sheep equivalent (DSE)
• Wool production (sales less purchases plus inventory change) per DSE and per hectare
• Sheep meat production per DSE and per hectare
• Cost of production per kilogram of wool produced
• Labour efficiency, considering the number of DSE managed relative to all labour days, including farm staff, shearing, crutching and contracting labour

If you answered "no" to any of these, it might be time to re-evaluate and identify areas for improvement. 

Other ways to enhance your current operations include:

• Improve feed utilisation: Match feed supply with demand and adjust your system to align livestock energy requirements with optimal pasture availability. Revisit and monitor your feed budgets and feed allocations for different classes of livestock
• Enhance labour efficiency: Review your infrastructure and equipment to ensure you are making the most of available resources
• Invest in genetics: Focus on breeding programs that deliver greater wool and meat value per unit of energy consumed
• Simplify operations: Avoid unnecessary complexities such as multiple shearing dates or joining ewe lambs, which require more management and may not be as profitable

The WA wool industry faces significant challenges, but it also has inherent strengths. By focusing on improving production efficiency, managing costs, adopting simple systems and adapting to market conditions, WA woolgrowers can thrive. The key is to focus on what you can control—your internal operations—rather than switching to another enterprise based on assumptions that may not be true. By doing so, woolgrowers can secure a sustainable and profitable future in the wool industry, without the disappointment of switching to a new enterprise.

For more information, check out the following:

• Why stay in wool sheep? Improving what you know delivers more value than moving to what you don’t. - Full Report by John Francis - Agrista
• AWI Webinar: Why Stay in Wool? - Recording of the Webinar delivered by John Francis - Agrista

Georgia Pugh, AWI Extension WA