Merino Enterprises Profitable and Competitive

March 31, 2006 -- Australian Wool Innovation Limited (AWI) announced that Merino wool producers have every reason to be positive, according to western district farm business consultant Dr. Graham Lean.

Speaking to producers at AWI?s Pathways to Profit forum, Lean said that wool enterprises had been competitive with most farm enterprises in the past five years despite low prices.

"Actual farm data demonstrates that Merino enterprises are profitable and competitive with other competing enterprises, even over the past two years of very low wool prices and high meat prices, wool performed," Lean said.

More importantly, a benchmarking analysis of more than 50 local farms over the past five years clearly rammed home the age-old message that it is not what you run that determines profitability but how well it is run.

"That is, management is more important than enterprise choice in determining profitability," Lean said.

The analysis confirmed the key profit drivers for Merino wool enterprises were stocking rate, fleece value per head, wool cut per hectare and time of lambing.

Increasing stocking rate means running stock smarter, not harder, by improving pastures through new, better-quality cultivars (plants) as well as shifting lambing to the spring to better match feed supply. Similarly, genetics play a major part in fleece value per head and cut per hectare.

Lean urged Merino producers contemplating an enterprise shift to think carefully and review actual farm and enterprise profitability by benchmarking the farm performance.

"In most instances, the changes to farm management required to make wool enterprises more profitable are less complex and easier to implement than changing enterprises. Further, the substantial costs often incurred in changing enterprises are mainly avoided by running the wool enterprise better,? he concluded.

Reprinted from Australian Wool Innovation Limited