SHEEP and lamb price competitiveness and transparency with the eastern states is vital to the future of Western Australia’s sheep meat and wool industry, according to WAFarmers livestock executive officer Kim Haywood.
Ms Haywood this week said a report exploring Australian sheep market structures and systems has acknowledged the significant price differences paid by meat processors in Western Australia for mutton, lamb and skins, when compared to prices paid in the eastern states.
The WAFarmers officer also highlighted to Sheep Central the role the WA-eastern states sheep and lamb price disparities played in WA flock retention and growth following increased west-to-east stock movements in recent months.
The Sheepmeat Market Structures and Systems Investigation report, released by Sheep Producers Australia, clearly identified that trade lamb and skin values are considerably lower than other states, and have been so for many years, she said.
“The report identified that prices paid in WA for trade lambs were consistently below prices paid at peak times for trade lambs in the southern eastern states, with a 10 to 20 percent price lift compared to 20 to 60pc price lift in southern eastern states,” she said.
“The largest variations in skin values appear to come out of the saleyard system, a system which is vital to the continuing competitive nature of the WA livestock industry.
“This makes it difficult to ascertain exactly what values are put on skins when offered as sale lots,’ Ms Haywood said.
“While there are challenges involved in the skin trade in WA, we find it impossible to justify these local issues being the only reason for such a massive difference in skin values between WA and the east.”
West-east sheep movements increase with price gap
The report found that the price gap between east and west markets has been quite large for extended periods, including during 2010, 2013, 2015 and 2016, when it climbed above 100c/kg. The report’s analysis of South Australian processor purchases from WA farms revealed that west-to-east trade flows generally occurred when the price gap is 50-100c/kg or greater.
Ms Haywood said the disparity in prices between Western Australian and eastern states markets for similar sheep meat categories, and the lack of transparency and accuracy in reporting, was limiting WA flock growth and industry development.
“Over the last three to four months we’ve had the greatest movement of sheep in all categories going (east) across the (SA-WA) border.
“That has a huge impact on our processors and market demand for Western Australia,” she said.
“It would be really good for our supply chains here to get some resolutions to some of the pricing issues.
“Our priority is to stop the decline in the WA sheep flock and turn that around and get some real profitability to encourage more people, particularly in the grain belt, to get back into sheep.”
Ms Haywood said if it can be proven that the WA sheep meat industry had good gross margins for producers within grain production systems and assuming good dog control, then “we can stop the haemorrhaging of the flock.”
“If we can get this sorted it would help everyone within the supply chain.”
Sheep Central has learned that an estimated record 129,549 lambs and 85,462 adult sheep, mostly Merino ewes, were trucked east out of WA from July-November 2017, including 57,590 in July alone. The recent massive east-west displacement of lambs has already exceeded the 101,663 head trucked across the border in the entire 2016-17 financial year, when 211,917 adult sheep were also consigned to eastern states buyers. In 2015-16, 30,016 lambs and 48,678 adult sheep from WA were sent east.
National price reporting needs to improve
Ms Haywood said there was a need for price reporting that truly reflected the actual prices being paid nationally at saleyards, over the hook at processors, on AuctionsPlus and by live exporters.
“Online platform data prices are not analysed or included in existing price reporting platforms.
“Their inclusion would significantly improve the overall accuracies of all price reports for all sheep types,” she said.
“There would be strong benefits in standardising the collection times and sheep categories for over the hook price reporting, as this would allow more consistent analysis and comparisons to keep buyers and sellers better informed.”
“Live export prices are strongly correlated and are generally a better price indicator for trade lamb prices in WA compared to saleyard, over the hook or direct price reporting at present.”
Ms Haywood said organisation of improved price reporting would require the co-operation of processors, Meat & Livestock Australia and producers, and could avoid the need for an ACCC-type investigation into sheep and lamb marketing. Conversion of live prices to carcase had also been an issue in WA, she said.
“The development, publication and promotion of an ‘Endemic Disease Information System’ will also help to improve carcase price transparency, by clarifying the understanding of carcase downgrading issues impacting carcase weights and trimming processes.”
Ms Haywood said the issue had received good support on a local level, with Darren West MLC and Rick Mazza MLC raising the issue in WA’s State Parliament prior to the report being undertaken.
“We will now work closely with SPA, state farming organisations and other industry stakeholders to draft an industry response to the inquiry.”
Click here to read the full SPA Sheepmeat Market Structures and Systems Investigation report.