One industry to benefit from reduced mining activity is agriculture, particularly sheep meat production.
One industry to benefit from reduced mining activity is agriculture, particularly sheep meat production.
A lower exchange rate and the increased availability of labour as the mining boom winds down have been good news for farmers in Western Australia, particularly sheep meat exporters.
In addition, a marginal drop in the size of the national flock is expected to have a major effect on saleyard prices this year, with the Australian Bureau of Agricultural and Resource Economics and Sciences forecasting a 9 per cent rise at auction.
Abares predicts lower supply will drive prices up as producers seek to rebuild flocks, while Meat and Livestock Australia expects a fall in volume of around 3.4 per cent.
But Sheepmeat Council of Australia president Jeff Murray believes there is a range of elements driving a bright period ahead for the sector.
“It’s a pretty positive picture all the way round I reckon,” Mr Murray told Business News.
Mr Murray, who raises sheep near Beverley in the western central Wheatbelt, said it marked a change from the experience of the past decade.
“There’s been strong grain prices for the past 10 years, and there’s been a shortage of labour,” he said.
“Sheep producers usually take a lot of labour to handle and shear and do all the jobs we need to do with sheep.
“And because of the strong grain prices and the mining boom we’ve had all our labour going to the mines.
“Anybody could get a job on the mines at far more than farmers could pay to run sheep.”
The more intense labour requirements for sheep production, combined with strong grain prices, had swung those not working on the mines towards grain farms, he said.
The impact was substantial, according to Abares, with the national sheep flock about 20 per cent smaller than just a decade ago at around 70 million.
A fifth of that flock is in WA.
Trading
An important contributing factor to the pick-up is the evolving trade arrangements with China.
“The thing about the lamb industry – and why the positive outlook is so strong – really the major exporters are Australia and New Zealand, and the major sheep flock is in China,” Mr Murray said.
In China, however, domestic production does not come close to satisfying demand, and hence it relies on imports.
Mr Murray cited the 2014 deal between processor V&V Walsh and Chinese Grand Farm, valued at around $1 billion, as one example of how Chinese demand had flowed through to Australia.
Although the Bunbury-based meat processor has only recently secured an export licence to China for chilled and frozen lamb (and beef), it’s expected 500,000 more sheep will be needed to meet the company’s export requirements in what is a major boost for local farmers.
“The Chinese free trade agreement will (also) make a lot of difference,” Mr Murray said. “We got two reductions in the tariff ... it’ll make our product a lot more competitive.”
Other major export destinations are the more traditional markets of the US and Middle East, although the two countries have different preferences in terms of meat type, with the US favouring heavier meats.
Live exports, which make up a substantial part of Middle Eastern demand, were worth around $190 million last year, with Abares expecting trade to increase to $260 million in 2016.
Mr Murray said breed wasn’t necessarily important in producing good meat, instead highlighting using the right feed and keeping the animals in a low-stress environment.
Unlike the recent interest in pastoral stations for raising cattle, which has attracted investments from mining entrepreneurs including Gina Rinehart and Andrew Forrest, there has been little high-profile activity in the sheep farming business.
A notable exception was the purchase in January of the Madura Plains property, near the state’s border with South Australia.
The purchaser, the Cooper family from SA, reportedly paid $10 million.
Elders real estate executive Malcolm French, who was involved in the Madura Plains deal, said it was the only recent sale he was aware of.
He said there were very few sheep-only farms in pastoral areas, mainly because of the threat of dingoes. Madura Plains was rare in that it had two fences encircling the property to protect from this threat.
Falling market share
In the domestic market, there has been a longer-term trend of decline for Australian sheep meat producers.
A Griffith University study showed it held a much smaller market share than pork, beef or chicken in 2011, despite being roughly equal 50 years previously.
Mutton has declined sharply, too.
