The fast paced rebound in Australian sheep numbers, fuelled by the current favourable seasonal conditions, would normally be viewed as a key lever for expected higher Merino wool production.
But according to industry experts, medium Merino wool prices will need to rally in coming months if they are to compete in the fight for mixed farming as well as battle anecdotal reports of a renewed switch to prime lamb production.
Executive Director of NCWSBA Paul Deane said an increasing flock wont necessarily point to an increase in wool supply, with data from MLA's latest sheep survey revealing most of the growth in Australian ewe numbers are associated with non-Merino sheep.
"The data shows some evidence that the relative proportions of different sheep breeds has changed within the flock in recent years," Mr Deane said.
"The 2021-22 Australian shorn wool production forecast is for an 8pc increase year-on-year, based on a forecast 4.6pc in sheep shorn numbers.
"While opening sheep numbers may not necessarily reflect a change in sheep shorn numbers, the survey points to the number of Merino breeding ewes as declining over the last two years, despite rebounding sheep numbers."
The estimated stock of the Merino ewe base at a national level indicates Merino ewes for breeding have fallen by around one million head, while the number of crossbred, composites and all other non-Merino types has increased by 1.75 million head over the two-year period.
Mr Deane believes medium Merino wool prices will need to lift in coming months.
"I would describe medium Merino prices as disappointing in the context of past prices being only slightly above the median of the last decade," Mr Deane said.
"Australian farmers are also receiving exceptional delivered prices at port for wheat and canola which may add to the pressure on how the profitability of medium wool production is perceived in the mixed cropping zones."
However, Nutrien Ag Solutions wool broker David Hart said the medium-term outlook for wool is very good.
"At the moment we need to remember that medium wool prices are subject to over supply because of the good season," Mr Hart said.
"Sheep producers are in the position to treat wool as a form of risk management.
"Why not have two bites of the cherry?
"The wool market, being cyclical, it has highs and lows, and when they are high the highs are very good.
He believes the medium Merino still holds firm in the sheep industry, nowadays producing a carcase fit to compete with any meat breed.
"The equation of meat verses wool at the moment clearly favours meat, but it is not a given that that situation will remain that way," Mr Hart said
"Where wool prices need to be to stop woolgrowers leaving wool production depends a lot on the profitability margins. We know there is upward pressure on costs, especially shearing.
"The specialist meat breeds - the shedding breeds - don't have those costs because obviously there are no shearing expenses.
"The British breeds in meat breeds generally still require shearing, but the higher meat prices allow them to absorb that cost."
But he said Merinos these days do a good job in providing the meat side of the equation to subsidise the shearing costs.
"The Merino is very different these days to the Merino 30 years ago," Mr Hart said.
"They are much more fertile and they have better carcases so they are also participating in the very good meat prices."
Current market prices are averaging 800 cents per kilogram for a crossbred lamb and 7.80c/kg for a Merino - a difference of just 20c/kg.
"If you were a Merino producer I think to base a decision to stay with them or to go to a meat breed, the current situation is a bit short sighted," Mr Hart said.
Data for lambs on hand at October 2021 showed a different story, with lambs on-farm increasing over the past two years for both Merino and non-Merino lambs.
Since October 2019, the number of Merino lambs has increased by around 1.4 million head versus a one million increase for all other lamb types (meat, first cross, composites, shedding etc.)
"The lamb trend might provide some hope for higher Merino adult ewe numbers over the next 12 months as they mature and are added to flocks," Mr Dean said.
"But how this plays out may still depend on how prices evolve, especially over the next six months."
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