In my experience with my clients, sheep income is half that of cropping income at best. I have just finished reading a well known benchmark report that has confirmed this.
And this is using historical sheep prices. With current sheep and wool prices, sheep income may only be one quarter to one third that of cropping.
Yes, I know, sheep are cheaper to run than cropping, so profits aren’t necessarily half that of cropping, but I can guarantee, on good country, crop will win over the long term. We don’t see too many people paying record prices for land to put it into 100% pasture. The returns simply aren’t there.
Before you sheep cocky’s spit into your laptop screen, I will concede that sheep have their place, but I want to try and dispel some of the old myths.
Myth 1. Sheep are good for cashflow.
Yes, sheep and wool income come in at different times of the year to crop income, but I don’t see this as a reason to run sheep. If you want cashflow at different times of the year from cropping you can grow a crop (at twice the profit of sheep) and take deferred grain income when it suits you. Or sell the grain at harvest, put the money in the bank, and withdraw it in May! Profit is king, not cashflow.
Myth 2. Sheep are cheap to run.
It’s true that sheep / pasture costs are less than crop so less money is risked. But with sheep income being less than crop, it’s more about costs as a percentage of income. Sheep / pasture costs are about 50% of sheep income, and crop costs are about 65% of crop income. But remember, with crop income being double that of crop, there is still a bigger margin from crop than sheep.
Also, many growers don’t count all of the costs that go into sheep such as grain retained for feed and paddocks sown to hay that could otherwise be sown to crop. If you grow some grain and feed it to your sheep, your cropping enterprise should sell the grain to your sheep enterprise.
Myth 3. I need sheep for resistant weed control.
When herbicide resistance was first a thing, one of the main solutions discussed was the ley farming system, with a phase of pasture to run down the ryegrass seedbank, followed by a phase of crop.
Yes, I’ve seen it work, and I’ve also seen it fail where the farmer doesn’t get 100% seed set control of the ryegrass in the pasture year because they delay spray topping to maintain sheep feed.
In my experience, continuous crop farms actually have cleaner crops than mixed farms. Many continuous croppers are throwing everything at the weeds and are generally having a win. I guess the good thing about pasture is it is a good fallback position for when a paddock gets really weedy and you can drop it out for a couple of years and make sure you do a good job of getting weed numbers down.
Myth 4. Cereal on pasture is my highest yield.
I’ve never been able to put my finger on exactly why, but cereal on grain legume will beat cereal on legume pasture every day of the week.
If you have the answer to this, I’d love to hear it.
And it’s hard to go past cereal on canola in the higher rainfall zones, despite the requirement for high rates of nitrogen.
Where do sheep fit in our system?
OK, I’m not totally anti-sheep, they do have their place. Here’s a list of where I believe sheep fit in our system.
1. Farmers who like sheep. This is number one for me because some farmers just prefer sheep farming than cropping, regardless of profitability. It’s not always about rational, financial reasoning.
2. Farms that are not suited to 100% cropping – eg. Farms with non-arable areas that can run sheep such as hilly, stony country, or soil types that don’t grow profitable crops such as deep sandy soils.
3. Frost prone farms/paddocks.
Who should think about getting out of sheep?
1. Farmers who don’t like sheep work! Sounds obvious, but I find that some farmers once liked their sheep work but they have fallen out of love with it. I have some clients that say to me, “I spend 40-50% of my time doing sheep work and they only represent 20% of my income!”.
2. Farmers in high rainfall areas that have traditionally been the motherland of the sheep industry. Modern agronomy has transformed these areas into cropping powerhouses.
3. Farmers who are frustrated with the shearing industry. Some growers are telling me they have lost their patience with shearers and I don’t see this getting any better for them. This isn’t everywhere, but it is something I’m hearing more and more.
4. Farmers who value holidays!
The tricky thing is that if you decide it’s time to exit the sheep industry, you will be selling out at the bottom of the market, so it may be worth thinking about staging this out over a couple of years. The experts tell me that the low sheep prices are likely to be around for 18 months to three years at a guess. If the recent downturn in the sheep market has pushed you to the point of selling your sheep, perhaps consider hanging in there for a year or so to avoid selling off your asset at record low prices.
The key for 2024 is to minimise the area of the farm in pasture and maximise the crop area. This may involve not joining the sheep at all this year. Before you put the rams in, have this discussion with your family and other professionals in your business and make an informed decision. The last thing you want to do is to feed expensive grain to low value sheep, so consider how to best set yourself up to avoid this.
Ray Harrington
If you’ve ever heard Ray give a presentation about the HWSC you will have heard him say that it was selling his sheep that started him down the path of looking for a mill to destroy weed seeds as they exit the harvester. He had seen his friends in the wheatbelt go to continuous crop and have big issues with resistant weeds and he figured his high rainfall area, famous for its sheep production, would be no different. In fact, it would probably be worse.
If you’re thinking about changing your farming system from mixed farming to continuous crop, especially if you’re in a high rainfall area, it is probably a good idea to follow Ray’s lead and add harvest weed seed control at the same time.
As the farming system changes, your farming practices need to change with it.
You could wait a few years until you start to have trouble, watching your ryegrass seedbank grow, or you could get into it on day one, and keep your seedbank low.
The Terminator Agronomist
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Please note this advice is general in nature and not based on your specific circumstances.