Profitability of different ewe breeds Economic Analyses and Extension of Elmore Field Days Ewe Trials

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1 Profitability of different ewe breeds Economic Analyses and Extension of Elmore Field Days Ewe Trials Authors Kieran Ransom Lisa Warn Lisa Warn Ag Consulting P/L John Webb Ware Mackinnon Project, University of Melbourne Date June 2018 The key finding Specialist dual purpose merinos with very good lambing percentages, wool value and body growth had higher gross margins per hectare, by an average of 30% above the other four breed enterprises and 18% above the local Merinos when stocked at the same DSE per hectare. When the comparisons were on gross margins per ewe, specialist dual purpose merinos averaged 29% above the other four breed enterprises and 33% above the local Merinos. Acknowledgements The Elmore Ewe trial was funded and conducted by the Elmore Field Days Inc. together with The Campaspe Prime Lamb Producers Group with professional help from three organisations and six product support sponsors. Australian Wool Innovation provided funds for the statistical and economic analyses. 1

2 Summary The Elmore Field Days trial Ewes for the Future Lambs, Wool & Profit compared the merit of five ewe types for prime lamb and wool production from 2009 to Ewe genotypes compared were the Border Leicester x Merino cross (BL x M), local Merinos from northern Victoria and three dual purpose Merinos namely the Centre Plus Merinos, the Dohne Merino and the South African Meat Merino (SAMM). The ewes were joined annually to terminal sires for prime lamb production and run together as one mob except at lambing; there were six opportunities to lamb, the first as ewe lambs. The Elmore trial generated very valuable information about the wool and meat income per head for each ewe type but couldn t provide data on gross margins per DSE or per hectare. The key finding was specialist dual purpose merinos with very good lambing percentages, wool value and body growth had higher gross margins per hectare by an average of 30% above the other four breed enterprises and 18% above the local Merinos at the same DSE stocking rate per hectare. When the comparisons were on gross margins per ewe specialist dual purpose merinos averaged 29% above the other four breed enterprises and 33% above the local Merinos. Additional analysis of flock age structure compared the gross margins of purchasing ewe lambs compared with 1.5 year-old BL x M ewe replacements. The analyses indicated purchasing BL x M replacements as heavy ewe lambs ready to join rather than as 18 month-old ewes increased gross margins per hectare by 7%. The effect of selling the ewes at 7 to 8 years of age rather than 6 to 7 years was also investigated. The analysis indicated this would increase gross margins by 6%, but if there was a 5% increase in ewe mortality from the older ewes the gross margin advantage was reduced to 3%. Many properties producing prime lambs from merinos also have self-replacing Merino flocks with surplus ewes joined to terminal sires. Subsequent analyses then compared the gross margins of a whole farm sheep system where dual-purpose Merino ewes were split to breed both (i) ewe replacements and merino wether lambs and (ii) surplus ewes joined to terminal sires for prime lamb production in a lucerne pasture based system in northern Victoria. The analyses using real farm data indicated that the self-replacing merino flock has a 7% higher gross margin per ewe, but a 15% reduction in gross margin per DSE compared to ewes producing terminal x merino cross prime lambs. Stocking rate sensitivity analyses indicated the gross margins per hectare of the local Merinos and Centre Plus Merinos were less affected by higher stocking rates than that of BL x M cross ewes. The sheep genetics area is changing rapidly, this report looks at the past, what about the future. The genetics situation today is different from when the Elmore field study started in 2009 from ewe lambs born in The rams breeding these ewes would have been bred from 2000 to There has been a rapid change from wool to dual purpose merino and specialist prime lamb production. This report emphasises the advantages of specialist dual purpose merinos over more traditional medium merinos. Medium merinos have changed and are continuing a change to a dual purpose focus. A combination of genetics for fine wool, reproduction, body growth, easy care, animal health and carcase quality is essential for a profitable sheep industry in most areas of Australia. The wool industry cannot rely on the good wool prices for the last two years as its saviour; unless the sheep industry changes, its future is questionable. 2

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4 Contents Background Method GrassGro modelling Gross margins and feed value Prices and costs Breed characters from Elmore trial The simulation experiments Results GrassGro is very good at simulating real farms Simulation study 1. Breed effects Comparison of GrassGro outputs with Elmore data Lamb marking percentage Lamb weight Lamb prices Supplementary feeding Gross lamb and wool returns per ewe Gross margins Gross margins per hectare for individual years Gross margins per hectare for each enterprise by 8-year timespans Gross margins per hectare over 24 years Gross margins per breeding ewe Feed value High and low wool prices over the last eight years Capital investment in ewes Simulation study 2. Flock age structure effects Simulation study 3. Stocking rate effects Simulation study 4. Self-replacing merino flock vs merinos to terminal sires Industry application Gross margins per hectare Returns per ewe Feed value Sourcing the best genetics Change genetics or change enterprise Flock age structure of BL x M ewes Self replacing flocks vs buy in ewes Sheep health problems in wet areas Prices and seasonal risk Other profitability studies Conclusion Appendix 1. Production and financial summary tables Appendix 1.1 Elmore lucerne pasture with crop and stubble grazing Appendix 1.2 Elmore annual pasture with crop and stubble grazing Appendix 1.3 Rutherglen annual pasture Appendix 1.4 Hamilton perennial ryegrass pasture

5 Background The Elmore Field Days trial Ewes for the Future Lambs, Wool & Profit compared the merit of five ewe types for prime lamb and wool production from 2009 to The main characteristics of interest were lambing percentages, wool weight, fibre diameter, ewe body size and lamb growth. Each of the five types was represented by 42 ewes randomly selected from three properties. The ewes were joined annually to terminal sires and run together as one mob except at lambing; there were six opportunities to lamb, the first as ewe lambs. The ewe breed types used were: Border Leicester x Merino cross (BL x M). The most common prime lamb mother in northern Victoria. Ewes were sourced with the help of the $uperborder$ group, a group within the Border Leicester breed society using Australian Sheep Breeding Values (ASBVs) to help breed better Border Leicester rams. Merino, Loddon Valley (Merino LV). The local Merinos, the second most common prime lamb mother in northern Victoria. The sheep are mostly based on Peppin bloodlines with some influence from South Australian bloodlines. Ewes were sourced with the help of the Loddon Valley Stud Merino Breeders Association. Centre Plus Merino (CP Merino). Centre Plus is a group breeding scheme and registered merino stud and in Central West NSW that aims to produce dual purpose sheep. This Merino strain has achieved a good reputation from the high dual purpose and fine wool index Australian Sheep Breeding Values (ASBVs) on the Sheep Genetics Australia website. Dohne. The Dohne is a dual-purpose breed developed in South Africa using Peppin type Merino ewes and German Mutton Merino sires. They have been selected for high fertility, rapid lamb growth rate and fine wool. There is a high level of farmer interest in this dual-purpose breed. Sheep were sourced with the assistance of the Australian Dohne Breeders Association. In 2008 the Dohne breed was in the early stages of introduction to Australia. Two properties supplied F2 ewe lambs while the third property supplied F3s. See note below. SAMM. The Prime SAMM (South African Meat Merino) is a dual-purpose sheep originally bred in South Africa to produce heavy slaughter lambs at a young age as well as good quality wool. The breed society is aiming at 60 per cent meat and 40 per cent wool in members breeding programs. Sheep were sourced with the assistance of the Prime SAMM Breeders Society of Australia. In 2008 the SAMM breed was in the early stages of introduction to Australia. Two properties supplied F3 ewe lambs while the third property supplied a mix of F2s and F3s. Note: F1 is the first cross, a F2 is a second cross and a F3 is a third cross when introducing a new breed. Breeds were chosen because (i) Border Leicester x Merino cross and Merino, Loddon Valley are the most common sheep used locally, they set the local benchmarks, (ii) Dohne and SAMMs had recently arrived from South Africa and there was little information on their performance and (iii) the Centre Plus Merino was chosen because of their high breeding values for dual purpose wool and meat productions on the Sheep Genetics Australia website. All five alternatives are commercially used in Northern Victoria The Elmore environment is regarded as a healthy environment for sheep. A planned animal health program was used and there were generally no issues with intestinal parasites, feet or flystrike. GrassGro assumes healthy sheep, but some environments such as Rutherglen or Hamilton might cause more animal health problems for Merinos than crossbred sheep. Benchmarking studies indicate that prime lamb and dual-purpose flocks have been performing better than wool (pure Merino) over the past few years. While the benchmarking studies allow a comparative analysis of profitability between enterprises and farms that allow producers to focus on the areas of their business where they can improve, there are a number of limitations when trying to extrapolate about optimizing production systems. For example, they do not allow specific recommendations about the most profitable management practices for different environments to developed, e.g. choice of sheep breed, time of lambing and specialist pastures for finishing lamb. 5

6 Method GrassGro modelling GrassGro, a computer simulation model was used to extrapolate from the Elmore trial and compare the gross margins of the five ewe enterprises, assuming they were run at the same average annual stocking rate. This analysis was conducted for four farms in three locations in Victoria. They were: 1. North Central Victoria (Elmore) with lucerne based pastures in rotations with crops, crops were grazed for a short period in winter and stubbles were grazed in summer. 2. North Central Victoria (Elmore) with annual pastures in rotations with crops, crops were grazed for a short period in winter and stubbles were grazed in summer. 3. North East Victoria (Rutherglen) using annual pastures for prime lamb production. 4. South West Victoria (Hamilton) using Perennial Ryegrass pastures for prime lamb production GrassGro a computer simulation model was used to model the farming systems from to Gross margins were calculated by seasonal years, April to March, using historical prices of meat and wool and historical costs including supplementary and drought feed. All prices and costs were converted to real dollars to account for inflation. The analyses thus included both seasonal and cost / price variability. The aim was to compare the gross margins of the five ewe enterprises, assuming they were run at the same average stocking rate expressed in DSE/ha terms. The ewe numbers per hectare at the season start for the Elmore Lucerne system were BLx M 3.2/ha, Merino LV 4.2/ha, CP Merino 3.6/ha, Dohne 4.2/ha, and SAMM 3.2/ha. Ewe numbers at shearing at the end of the year are shown in Appendix 1. This helped answer the following questions: - What are the production and gross margin differences, between some ewe breed alternatives for prime lamb and wool production, with variable seasonal conditions and variable prices and costs? - How do changes in flock structure, such as purchasing and joining crossbred ewe lambs versus 1.5 year-old ewe replacements or keeping ewes until older ages, affect profitability? - How does stocking rate affect the profitability of the alternatives? - What is the profitability of a self-replacing merino flock, that breeds merino wether lambs and its own replacement ewes for the terminal sire prime lamb enterprise, relative to a system where ewes are purchased? The localities selected for the study have long-term average rainfalls from 405 mm to 695 mm. All fall within the temperate pasture and crop zone but the reliability varies markedly between the sites (Figure 1). Annual rain mm Elmore Rutherglen Hamilton 66% falls in growing season from Apr to Oct 65% falls in growing season from Apr to Oct 78% falls in longer growing season from Apr to Nov Wettest 16% of years Wetter 32% of years Average rain Dryer 32% of years Driest 16% of years Elmore has a long-term rainfall of 406 mm and is a typical northern Victorian climate; about 35% of the rain falls over the five summer months and is of little value on farms reliant on annual pastures. About 20% of years are below 320 mm rain and large amounts of supplementary feeding are needed in these years with annual pastures and stocking rates of 4 to 5 DSE/ha. Lucerne is a more reliable pasture in this zone; it usually responds to summer rain and typically extends the spring green growth by about six weeks. Farms with large areas of lucerne normally carry 6 to 9 DSE/ha. Rutherglen, average rainfall 595 mm, with 35% in the summer months from November to March, also has an unreliable pasture growing season with large amounts of supplementary feeding needed in about 20% of years. Typical stocking rates in the area are 7 to 9 DSE/ha. Hamilton has a more reliable 690 mm average rainfall and thus higher and more reliable pasture production. The Victorian Farm Monitor Project indicates the top 20% of farms have stocking rates of 15 to 17 DSE/ha. Research plots at the Hamilton Research Institute have carried over 22 DSE/ha with minimal supplementary feeding in most years. 6

7 Gross margins and feed value Gross margins Gross margins per hectare were calculated using approximately the same DSE/ha stocking rate. One DSE is defined as the amount of feed energy needed to maintain one wether at 50 kg for a year. It equates to about 300 to 320 kg of pasture feed eaten per year. Ewe numbers per hectare for each breed were adjusted so the DSE rating was about the same within each location system. Gross margins per ewe were calculated from gross income and costs: Income items were: (i) Lamb sales per ewe calculated from lamb marking percentage, sale weight, dressing percentage, carcase price per kilogram and skin value. (ii) Wool income per ewe was calculated from clean fleece weight and price determined by its fibre diameter. (iii) Cast for age sheep sales were calculated from the ewe weight at sale, dressing percentage, carcase price per kilogram and skin value. Costs were: (i) Ewe replacement costs. (ii) Shearing and animal health costs. (iii) Supplementary feed costs. (iv) Pasture costs including fertiliser. (v) Sales and purchasing costs including commissions, freight and industry levies. Stock trading was calculated from lamb sales plus cast for age sheep sales less costs of replacement ewes and rams. Feed value (pasture and supplement) The feed value is a measure of the value of sheep feed, (both pasture and supplement) eaten to generating enterprise profits. GrassGro calculates the total pasture and supplement eaten annually from estimated daily intake. The value of this feed is calculated from the income of wool and stock trading less the stock expenses of shearing and animal health, sales and purchasing costs. Pasture and supplement costs are not included. For example the feed value is the Net income excluding feed costs (eg $437/ha) divided by the amount of feed eaten (eg 1897 kg/ha DM) to give the feed value of 23 c/kg DM. See the example next page. This is a similar concept to the income and expense per kilogram of feed eaten by the New Zealand Farmax benchmarking software. 7

8 Gross margins and Feed value example Income notes Wool sales Ewe wool sales $136,900 XB lamb wool sales $4,800 35% lambs shorn, 65% sold in wool Total wool sales $141,700 Sheep trading Sheep opening stock, negative - $194,250 valuation 1850 $105/head & rams Replacement ewes & rams, negative - $69,300 (not ATO tax valuation) Lamb sales $253,400 CFA sales ewes & rams $20,100 Sheep closing stock $194,250 same numbers and valuation as opening stock Sheep trading gross profit $204,200 Total income $345,900 Expenses Sale and buying costs Sheep sale costs $18,378 incl commissions, levies, freight etc Wool sale costs $10,628 Sheep buying costs $1,600 mainly freight Total sale costs $30,606 Husbandry and animal health Shearing and crutching $21,200 contract rates Animal health $8,500 Casual labour $1,850 lamb marking Total husbandry and animal health $31,550 Feed costs Supplementary feed $27,200 mainly grain for ewes around lambing Pasture maintainence $23,000 fertilisers, weed control etc Pasture establishment $5,200 Best to use average in comparative gross margins Fodder crops $0 eg one year crop for finishing lambs Irrigation $0 if applicable Total feed costs $55,400 Total expenses $117,556 Gross margin or Net income $228,345 Effective grazing area, ha 650 Ewe number, head 1850 DSE rating per ewe & lamb unit 2.15 Total DSE on farm 3978 total DSE, 1850 DSE per ewe-lamb unit Gross margin per hectare Gross margin per DSE Gross margin per ewe $351 Gross margin divided hectares grazing area $57.41 Gross margin divided by total DSE on farm $ Gross margin divided by number of ewes Feed value calculation Total income $345,900 Costs Total sale costs $30,606 Total husbandry and animal health $31,550 Feed costs not includes Costs, excluding feed costs $62,156 Net income excluding feed costs per farm $283,745 Effective grazing area, ha 650 Net income excluding feed costs per hectare $437 GrassGro estimate pasture & supplement eaten Feed value 1897 kg feed eaten/ha, pasture & supplement $0.230 c/kg DM (dry matter) 8

9 Prices and costs Actual nominal prices and costs from 1994 to 2018 were collated. All prices and costs were then converted to real dollars, to adjust for inflation. The prices per kg carcase weight received each season for lambs reaching 21 kg carcase weight, sold in either late spring or late summer depending on the system, are shown in Figure 1a. Discounts for lambs under this weight ranged from 10% to 36% per kilogram. Wool from each breed was valued using its fibre diameter each year. The micron premiums or discounts in relation to the Eastern Market Indicator thus reflected the price variability between fine and medium merino and crossbred wools. Supplementary or drought feed was fed at its real price each year, this reflected the actual situation where supplementary feed was costed at up to $440/t (real) in the to drought. This reflected the on-farm situation when the price of drought fodder usually rises in droughts, alternatively long term stored drought fodder could be sold in the open market during these droughts. Prime lamb prices Wool prices (real) by micron Wheat price as supplementary feed The BL x M replacement ewe cost was estimated as being on average 30% higher than a 23 kg carcase weight prime lambs in that year. Quality local merinos were estimated at 80% of this price. The dual-purpose types of CP Merino, Dohne and SAMM are not readily available in large numbers to estimate their price. SAMM ewes were costed the same as BL x M cross because of their similar performance. Dohnes were costed at the same price as the local Merinos and the CP Merino ewes were costed between them because of their premium in the market and their higher lambing percentages. 9

10 Breed characters from Elmore trial The breed characters used in the GrassGro analyses came from the Elmore trial Two reports, a summary and details, are available on the Elmore Field Days website. 10

11 The simulation experiments Four simulation experiments were conducted to examine the profitability of the five breed types. The first study looked at just the main breed effects, then three other studies tested questions commonly asked: (i) What difference does the age structure of a flock, especially when BL x M ewes can have an extra year of productive life by buying and joining them as ewe lambs. (ii) What effect does the stocking rate of the breed types have on profitability. And (iii) How does the profitability of a self-replacing merino flock breeding replacement ewes compare to merino ewes joined to terminal sires. Details are shown below. Simulation study 1. Breed effects Four farm systems at three locations, as described above, were analysed. Ewe stocking rate was set so each breed had approximately the same average annual DSE rating per hectare. A supplement of wheat was fed to maintain ewe condition score whenever it was required. Simulation study 2. Flock structure effects Border Leicester x Merino cross ewes are frequently purchased at 7 to 8 months of age, then joined as ewe lambs. These ewe lambs are usually of lower weight than their 18 month-old alternatives, but they are of lower cost and lower lambing percentage in their first year as ewe lambs, but they have an extra year of productive life if sold at the same age of 6 to 7 years old. There is also debate that the hybrid vigour of crossbred ewes enables them to have a longer productive life compared to a merino. These issues were tested by adjusting the GrassGro parameters to purchase Border Leicester x Merino cross ewe lambs at 51 kg, rather than the 58 kg of 18 month-old stock. Their replacement price was also reduced by $10 per head to reflect market conditions. Further analyses tested ewes being kept longer and sold at 7 to 8 years of age rather than 6 to 7 years. The analyses for keeping ewes to older ages were tested with two ewe death rates; firstly, with a 5% death rate across all ages then with a 10% death rate in the oldest age group of ewes when they were being kept until 7 to 8 years of age. Simulation study 3. Stocking rate effects The effect of stocking rate was tested at the Elmore Lucerne system for the BL x M, Merino LV and CP Merino breeds. The stocking rates under test reflected the on-farm situation for the Elmore-Raywood Lucerne and crop system where longterm stocking rates range from 6 to 10 DSE/ha on the lucerne area. Simulation study 4. Self-replacing merino flock versus purchase ewes for prime lambs To avoid having to purchase replacement ewes, many sheep producers run 2 sheep enterprises/flocks that is (i) a selfreplacing Merino flock producing replacement ewes and wether lambs and (ii) a flock of surplus Merino ewes joined to White Suffolk rams to produce crossbred prime lambs. GrassGro was also used to analyse the production and profitability of this system. A mixed farm sheep & crop producer in North Central Victoria supplied detailed farm records of sheep numbers, carcase weights and prices from White Suffolk x Merino prime lamb and Merino wether lambs for 14 seasons from to This data was used to calibrate GrassGro. The farm had a similar management program to the Elmore-Raywood test farm with lucerne based pastures and winter crop grazing in winter and stubble grazing available in summer. Ewes in both systems lambed in late winter. Crossbred prime lambs were sold in Feb-March after reaching a target weight of 50 kg, with grain finishing to reach the target weight where needed. Merino wether lambs were shorn 4 weeks prior to sale in late autumn. 11

12 Results GrassGro is very good at simulating real farms Sheep production in the Elmore Lucerne and crop system simulated in GrassGro was validated against some farm data to ensure it reflected real farm situations. The Elmore Lucerne with crop grazing system was based on information provided by several producers with similar sheep systems. One producer provided 14 years of White Suffolk x Merino prime lamb weights, carcase weights and prices to help validate GrassGro estimates in a commercial farm environment. The same producer also provided merino wether lamb live weights, carcase weights and prices to validate the gross margin estimates of the Merino flock producing replacement ewes for the prime lamb enterprise on the same farm. The validation comparing farm data from the Elmore lucerne and crops system and GrassGro predictions are shown below. The relationship between actual farm and GrassGro predicted was considered good as farm management including times of sales and the amount of supplementary feeding to achieve target weights changed slightly each year as a results of meat prices and costs of supplementary feed varied, while GrassGro is programmed to the same feeding rules and lamb target weights each season. An example, the season had a very wet summer and early autumn, there was abundant lucerne growth and the lamb market was high. The owner chose to keep lambs to a live weight of nearly 60 kg average to capitalize on the seasonal conditions and good lamb market. GrassGro outputs vs real farm data for a dual purpose merino prime lamb enterprise showing first cross prime lamb weights (above) and lamb prices received including skin values (below). Simulation study 1. Breed effects Comparison of GrassGro outputs with Elmore data The key measures of mature ewe weight, lamb marking percentage, lamb weight, wool weight and wool fibre diameter were ranked by GrassGro in the same order across the four farming systems and matched the rank order of the original Elmore trial data. The results presented here in detail are mostly the Elmore Lucerne pasture and crops system. The ewe breed differences were consistent across all four sheep farming systems environments and management systems. Details from all four systems are shown at the end of this document in the Appendix. 12

13 Lamb marking percentage The 24 years simulation of lamb marking percentages for the Elmore Lucerne System are shown below. The rank order for marking percentage was the same across all four sheep production systems. Lamb weight Lambs born from BL x M cross and SAMM ewes were heavier and brought higher prices than the lambs from the three other breeds even though these two breeds had more twins that normally grow 10 to 20% slower than singles to weaning. This lamb live weight result was consistent with the original Elmore trial data. The difference in lamb weight between the BL x M cross and Merinos LV was 3.4 kg in the original Elmore data. But the difference in the simulated Elmore Lucerne system was only 2.3 kg because lambs were supplementary fed with grain on lucerne to try to reach target weights by a due date and they were sold earlier if they reached the target weight, but at a cost of more supplementary feeding. At Rutherglen the Merino LV lambs were 3.5 kg heavier than the BL x M cross, similar to the original Elmore data, because all lambs were sold on the same date rather than trying to reach a target weight. 13

14 Lamb prices GrassGro calculated lamb prices from live weight and dressing percentage. Lamb sale dates were; Elmore Lucerne system on or before 30 Mar, lambs were supplementary fed to reach a target sale weight of 50kg, Elmore Annual Pasture system 18 Nov, Rutherglen Annual Pasture System 18 Nov, and Hamilton Perennial Rye System 20 Dec. At the Elmore Lucerne system lambs were grain fed on lucerne to reach a 50 kg target weight until the 30 March, a typical practice on district farms. This resulted in heavier lambs and higher prices as lambs sold in February March normally receive a higher price per kilo than lambs sold in late spring. At Rutherglen lambs were sold before potential grass seed problems. The average prices also reflect several poor seasons over the last eight years. As well lambs were sold in November, usually a time of lower prices per kg. At Hamilton lambs weights and pices closely reflected the rank order as the original Elmore trial. 14

15 Supplementary feeding GrassGro estimated the supplementary feed needed to keep the ewes in condition score 2.5 throughout the year except at lambing when they were fed to condition score 3.5. Ewes of higher mature weight need less feed per kilo of live weight to maintain weight, for example; a large frame merino sheep type of 10% higher mature weight needs only about 7% more feed compared to a smaller frame merino type at the same condition score. In addition, a condition loss of one unit also equates to about 9kg weight loss in larger breeds and about 7 kg loss in smaller breeds. These two factors together favour larger sheep in times of feed shortage. The year to year supplementary feeding levels reflected the good and poor seasons. At Rutherglen the dry period 2002 to 2009 required high levels of supplementary feed. Supplementary feed per ewe was similar between breeds within each system. Lighter, smaller ewes such as the Merinos LV needed similar amounts of supplement per ewe/lamb unit than the larger breeds with high lambing percentages such as the BL x M and the SAMMs. For example, in the Rutherglen system the BL x M ewes were fed 65 kg per ewe or 252 kg/ha compared to the Merinos that were fed 59 kg per ewe or 290 kg/ha to achieve the same condition score targets.. At the Elmore Lucerne system large amounts of supplementary feeding were again needed to maintain the ewes and help finish the lambs in the highly variable seasons. Reliable seasons at Hamilton resulted in low supplementary feed needs. 15

16 Gross lamb and wool returns per ewe The Merino LV and CP Merino had the greatest wool returns per ewe, whereas BL x M and SAMM had the greatest lamb returns. When wool and meat were combined the BL x M, CP Merino and SAMM had similar total income per ewe. The estimated gross returns from lamb and wool for the Elmore Lucerne system are shown here. Results for all location - systems are shown in Appendix 1. Over the 24-year period the CP Merinos averaged $51 wool per head while the Merino LV averaged $48. The CP Merinos averaged 15% less CFW per head than the Merinos LV, but the price premium for finer wool, especially in the years and 2011 and increased the returns for the CP Merino over the 24-year period. However, in the last 8 years from to the premium for finer wool was 5% for four years and 19% for the last two years. Good lamb returns at the Elmore Lucerne system At Rutherglen wool contributed a higher percentage of gross wool and lamb income than at the Elmore Lucerne system. 16

17 Gross margins Gross margins per hectare for individual years The effects of seasonal and price variation on annual gross margins for the BL x M ewe system at Elmore and Hamilton are shown below. At Elmore the years to reflected a time of lower lamb prices and reasonable seasons. The years to reflected the drought in northern Victoria, supplementary feed was costly, especially the years and when drought grain rations were around $440/t real. Gross margins were higher from to , a time of both reasonable seasons and higher lamb prices. The very high gross margin at Elmore in reflected the wet summer, abundant lucerne growth, very heavy lambs and high prices for lambs sold from January to May This also reflects the situation on a case study farm that supplied 14 years of lamb carcase weights and prices to validate the computer simulations. At Hamilton in South West Victoria, gross margins/ha are substantially higher than Elmore due to the higher stocking rate and lower supplementary feeding costs. The generally higher gross margins from to reflect the shift to higher lamb prices that occurred around At Hamilton there were only two dry years over the 24 seasonal years of the study. The lower gross margins from to reflect the dry seasons and the high supplementary feed costs. Despite the higher supplementary feed costs in these years, gross margins were still positive. The Elmore annuals and Rutherglen annuals systems averaged close to zero gross margins over this eight year drought period (Appendix 1.2 and 1.3); additional overhead costs resulted in serious financial situations for many farms. Gross margins per hectare for each enterprise by 8-year timespans The gross margins for the 24 years were divided into 8-year sections to highlight the differences due to seasonal conditions and pasture production, prices for lamb and wool and the cost of supplementary feed. The figures show the results for the four location-systems. Features of each period were: (i) 1994 to 2001 was a period of normal seasons, lamb prices averaged 325 c/kg real for finished lamb and the wool EMI averaged 1016 c/kg real and the price of fine 19 um wool had a peak premium of 54% above the 21um indicator. Supplementary feed grain averaged $209/t real. (ii) 2002 to 2009 was a period of prolonged dry seasons and drought in Northern and North East Victoria but average seasons in South West Victoria at Hamilton except in and Lamb prices increased, finished lambs averaged 475 c/kg real, but lower lamb weights, lower prices per kg for light lambs and higher supplementary feed grain prices reduced lamb returns. The wool EMI was 1115 c/kg (real) but the price of fine19 um wool was at an average premium of 18% about the 21um indicator. Supplementary feed grain averaged $295/t and for the seasons and averaged $448/t. The overall effect of the prolonged dry spell in northern Victoria for the Elmore Lucerne pasture, Elmore annual pasture and Rutherglen annual pasture systems was a reduction in gross margin of 60 to 80% while there was a minor effect on gross margins at Hamilton over this period (see the Figures following) (iii) 2010 to 2017, a period of normal seasons and higher lamb prices that averaged 538 c/kg real. The wool EMI was steady for about 6 years but was strong for 2016 to The premiums for 19 um wool over 21 micron wool varied from 3% to 19% over extended periods. Supplementary feed needs were reduced in northern Victoria and the feed grain price averaged $228/t real. The reasonable seasons, steady prices for meat and wool and lower levels of supplementary feeding resulted in the best gross margins for all location-systems. 17

18 At Elmore gross margins were highest over the years 2010 to 2017 due to higher lamb prices than in the previous 8 years. The drought period 2002 to 2009 resulted in lower gross margins due to high supplementary feed amounts and prices while lamb returns were lower as lambs mostly did not reach slaughter weights and were sold as store finisher weights and prices. The effect of the drought was minimal at Hamilton compared to the other systems and gross margins were consistently good. A key feature of the 3 quite different 8 year periods was the rank order of gross margins per hectare was consistent over the entire 24 years. Specialist dual purpose merinos, represented by CP Merinos in this study consistently out-performed the other 4 breeds. Elmore Lucerne and Crop Grazing system Elmore Annual Pasture and Crop Grazing system Rutherglen Annual Pasture system Hamilton Perennial Ryegrass system 18