An increasing number of farmers are seeking to mitigate risk on-farm by lifting Merino numbers within their mixed farming operations in a bid to balance the books and generate cash flow more evenly across the year.
Sheep classer Michael Elmes, Smartstock Sheep Services, Narrandera, has seen an extraordinary increase in his clients lifting sheep numbers in an effort to stabilise costs and income on-farm.
Michael, who operates one of Australia’s largest sheep classing businesses advising leading studs through to large commercial operators, has seen an increase in demand for high quality Merino ewes as clients sought to reduce the amount of land solely cropped on their properties.
There were multiple factors at play, he said, the first being risk management with clients chasing better cash flow across the year, rather than waiting for “one big pay cheque”.
“There are five factors that you have no control over if you are 100% cropping – fuel, chemical and fertiliser prices, machinery costs and finance,” Michael said. “Then at the end of the year, you rely on the gods to get a crop off and then some market stability and weather to give you a good price for all your effort.”
As an example, Michael said the same quality wheat made $130 per tonne more in 2023 than in 2024, which has a major effect on bottom lines.
The experienced Merino advisor has seen an increase in demand for high quality Merino ewes to go into self-replacing flocks.
"The best operations are the ones with a self-replacing flock and using a terminal sire over the surplus ewes,” Michael Elmes said. “80% of the profit and income comes from 20% of the industry and those that are doing it well are in that bracket. The rest make up the 80% of producers only generating 20% of the income.”
“When you have the ability to get a wool cheque, produce young and old surplus stock and wethers that are all saleable out of the Merino flock, then you can join the cast-for-age and culls to a terminal sire and generate a first cross lamb at $200 – you have a very profitable enterprise and that’s why savvy farmers are increasing numbers rather than reducing.”
“Even with the low wool market of recent times, the prices earned for surplus sheep, wether lambs and crossbred lambs to slaughter still allows a handy profit, whether it be a good or bad year season wise.”
Michael was adamant that the sheep flocks run on cropping country paid the interest and running costs every year – it was something you can bank on.
Having the ability to sell stock at multiple times of the year enables increased cash flow, reduces weed management on-farm and helps to fund cropping costs at the end of the year.
“In a year when you have a great crop, you reap the rewards of that year, but in an average or bad year, you have livestock to cover your costs and generate turnover throughout the year, reducing the need for a massive overdraft,” he said.
Michael finished by saying that he can’t predict what interest rates will do or the future of the world economy, but he believes there will always be fibre and meat protein required in the world and that you can bank on.
Written by Brett Tindal
