An economic analysis of sheep flock structures for mixed enterprise Australian farm businesses

Michael Young, Ross Kingwell, John Young and Phil Vercoe

Australian Journal of Agricultural and Resource Economics, 2020, vol. 64, issue 3, 677-699

Abstract: A strategic question facing many mixed enterprise broadacre farm businesses in Australia is, ‘What sheep flock size and structure is most profitable to complement the farm’s cropping enterprises?' This study answers this question for a typical large mixed enterprise farm business in a key production region of Australia. Whole‐farm bioeconomic modelling, combined with broad‐ranging sensitivity analysis, is used to examine the profitability of different sheep flock structures and sizes. We find the most profitable flock structure is to run Merino ewes and turn off finished Merino or first‐cross lambs. The profitable selection of these flocks is robust to commodity price variation but does require the farmer to give more attention to sheep management. The correct choice of flock structure greatly adds to farm profit. A farm based on cropping and a self‐replacing Merino flock using surplus ewes for first‐cross, meat lamb production earns 33 per cent more profit than a similar farm that runs a traditional self‐replacing Merino flock that emphasises wool production. Of far less importance than flock structure, as a source of additional profit, is to increase flock size or adjust cropping intensity.

Date: 2020
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