New gross margin calculations have shown that prime lamb production and replacement purchases emerged as the top-performing sheep enterprises of 2024, demonstrating resilience in a dynamic industry.
According to recent analysis from the NSW Department of Primary Industries and Regional Development (NSW DPIRD), economic returns for 20-micron ewe and 1st Cross Eweenterprises—both joined with terminal rams—have increased by five percent from 2022.
Returns from the 20-micron ewe achieved a gross margin of $32.09 per Dry Sheep Equivalent (DSE), while the 1st Cross Ewe saw returns of $27.46 per DSE.
NSW DPIRD Sheep Development Officer Geoff Casburn said that stable slaughter lamb values and lower replacement ewe costs contributed to their gain, with 20-micron ewe enterprises claiming the top spot for 2024, thanks to the additional income generated from Merino wool.
"The second best result was self-replacing Dorper enterprises, which had a gross margin of $28.71 per DSE. They also recorded the third-highest sheep sale income, alongside the lowest variable costs per DSE," Mr Casburn said.
"This strong result is due to the absence of wool harvesting costs and low replacement expenses, enabling Dorper producers to avoid the volatility of wool prices and high labour costs."
Sheep gross margin calculations covered three main cost categories: replacements, wool harvesting, and fodder.
Mr Casburn explained that these cost categories impact enterprises differently. Wool-focused enterprises typically have larger harvesting costs, while meat-focused enterprises incur higher replacement ewe and fodder costs.
"There is anecdotal evidence that a shortage of shearers and shed hands in 2024 has driven wool harvesting costs higher across many regions."
"While the gross margin analysis used award rates to calculate wool harvesting costs, if these costs increased by 25 percent, it would lead to a reduction in gross margins—from $26.08 down to $24.03 per DSE in the 18-micron ewe enterprise this year. Similarly, a 25 percent increase in fodder costs would reduce returns from $27.39 to $25.16 per DSE for 1st Cross Ewes joined 100 percent to terminal rams," Mr Casburn said.
"A combination of lower wool incomes, weaker mutton sale values, and an oversupply of ewe hoggets and wether weaners has put downward pressure on prices, resulting in reduced incomes for many sheep producers."
"The self-replacing 18-micron wool-focused enterprise achieved $26.08 per DSE, which is below earnings for 2022, but still remains on par with meat-focused enterprises, demonstrating wool's continued contribution to enterprise performance."
Despite current market challenges, the outlook for sheep enterprises remains positive overall, with solid returns from prime lamb expected to continue. This is likely to drive higher incomes within wool enterprises that are joining some or all of their flocks to terminal rams.
"Looking ahead, producers should focus on enterprise flexibility and diversification in both meat and wool to maximise returns and protect themselves from falls in either market," Mr Casburn concluded.
To view the full list of sheep gross margin budgets and a more detailed analysis of returns for 2024:
