Decisions During Drought – WA Woolgrowers

Many woolgrowers will face complex and emotive decisions regarding their business, animals and pasture resources going into and coming out of drought. For many, maintaining sheep helps diversify income, improve risk management and provide benefits to the cropping phase through weed control, nitrogen and organic matter.

Drought planning is not about making profits - it is about minimising any losses. These key messages and tips are designed to support decision making during drought.

1. MAKE A PLAN

Under the stress of a poor season, consider a five point plan:

Numbers in brackets, e.g, (4), refer to headings with detailed notes later in the article

2. ECONOMICS OF RETAINING SHEEP

Sheep are normally fed over summer. Under adverse seasonal conditions they require even more feed.

Sometimes it is important to retain sheep where they have higher values than meat values. For ram breeding flocks, sheep that have been carefully selected over many years, new breeds, and ewes that you estimate will be difficult to source post drought, the economics of feeding take on a different perspective.

Under severe conditions, confinement feeding can be recommended for many reasons:

1. Care of the property with less degradation (wind and water erosion)
2. Quicker pasture recovery with rain
3. Less feed required because the sheep do not walk as far
4. Greater control of feeding and water supplies
5. More simple and regular checks on the results of feeding and the condition of sheep.

The following table gives you an indication of the cost of various feedstuffs on a per megajoule (MJ) basis after correcting for moisture.

Metabolisable energy costs (c/MJ) over a range of grain prices

Normal feeding costs

Traditionally, WA sheep producers feed approximately 300 MJ per dry sheep equivalent (DSE) through summer. Depending on grain prices, this will cost between $6 and $12/DSE over summer:

• $6.00 per DSE for summer @ 2 c/MJ
• $9.00 per DSE for summer @ 3 c/MJ
• $12.00 per DSE for summer @ 4 c/MJ

Without paddock feed, sheep will need to be fed all summer, and perhaps longer depending on when you estimate the season will break.

Use the following table to quickly calculate the weekly cost of maintaining various classes of sheep under droughtlot conditions using wheat as the supplement (13.1 MJ/kg @ 90% moisture). In arriving at a full cost, remember to allow for additives, roughage and labour. The costs will vary according to livestock class, feed type and cost, condition score to be maintained and whether you are feeding in a droughtlot or paddock situation.

Weekly feed costs for a range of livestock classes and grain prices (droughtlotting)

More detailed costs of feeding can be obtained from programs such as Stockplan^® and Lifetime Wool Feed BudgetTables for Dry Times.

Lessons and questions

• Are your sheep worth the cost of this feed?
• Do you have the financial resources to feed?
• Wool return to offset costs will be less than normal - quantity and quality
• Dry sheep are the cheapest to feed
• If you mate ewes, you will have to feed more as they get later into pregnancy
• Consider later mating, or not mating in a drought year
• Will selling the sheep and not feeding provide sufficient money to replace the animal in the future?

3. SHEEP ECONOMICS

Some say that “sheep do not pay”. Not only do sheep pay, but they can pay better.

State-wide benchmarking undertaken by the AWI extension network, The Sheep’s Back, showed that gross margins from 2004-2007 averaged $17.50 per DSE.

It is not the average that matters but the range of performance that shows the potential for improving sheep profitability. The top 30% of performers in this benchmark group had a considerably higher gross margin per DSE. The overall statistics for Sheep’s Back participants tabled below show a similar result for gross margin per hectare.

Lessons

• Top producers run a higher stocking rate
• Top producers get more income per DSE
• Wool still matters, it represents the highest output from sheep
• Within limits, high stocking rate does not reduce output of individuals
• Better producers use feed more efficiently
• Variation points to possibilities
• There is a challenge to the individual to improve sheep performance - study how to do this.

4. SHEEP AND CROP

Much work has been done looking at the optimum ratio of sheep and crop. There is a general consensus that profit tends to maximise in the range of 60-80% crop depending on the rainfall zone and soil types.

The chief reason for having a livestock enterprise combined with crop is to manage risk.

As the proportion of cropping increases, the cost of growing each hectare of crop also increases. All things being equal, more crop can mean more profit, but the capital involved in growing that crop has increased, putting more input costs at risk from crop failure. Having livestock may reduce profit slightly but reduce the risk in a big way.

There are other reasons to consider livestock:

1. Using land unsuitable for crop which occurs on most farms
2. Using labour more efficiently
3. Improvement in farm value
4. Rotational advantages
5. Weed control
6. A longer list of benefits for those prepared to consider the advantages of livestock.

If seasons become less reliable under climate change, cropping will become more risky, with a greater chance of either no sowing or crop failure. Monocultures under this scenario are particularly risky. There is strong evidence that having sheep in the system will spread and reduce the risk. Even where there tends to be no or little income from crop, there is usually some from the sheep enterprise. Running some sheep is a sensible diversification.

5. FLOCK RECOVERY

Flock recovery is a matter balancing the cost of maintaining sheep over this summer and the speed of regaining original numbers.

An alternative recovery path is to sell the sheep, save the cost of feeding and then purchase replacements. It is tempting to suppose that replacement prices will be extreme. Anecdotal evidence suggests this is not always the case. There are usually cheaper sheep available than those reported in the newspapers.

Lambs, provided they have had a good start and are reasonably well grown, can be subjected to a period of slow growth. After the drought, with adequate feed, they will make compensatory growth. A successful mating will depend on achieving minimum body weights prior to mating.

Dry sheep are the cheapest to feed and can be fed a maintenance ration. A typical example of this is the ewe hogget due to lamb for the first time. During drought, consider not mating. Instead, maintain the ewe hogget as a dry sheep until seasonal conditions improve.

Ewes do not have to be mated - let them have a year off and you can feed them more cheaply. If you must mate, mate for a later lambing to reduce summer feeding costs.

Through all this, do the maths and you will see that a flock will recover to full numbers very quickly, especially if young sheep are kept and older sheep sold.

6. KEEP THE YOUNGEST AND THE BEST

Some selection can pay dividends. Preg test mated ewes as soon as you can. Dispose of the dry’s, or feed them accordingly.

With young sheep, consider fleece testing and measuring fleece weights for, say, the ewe hoggets, and keeping the higher performers for the future flock. These attributes are repeatable later in life and heritable - a lifetime advantage and one that is partially passed on to the next generation. This added cost will pay handsome dividends coming out of drought.

7. SECURE YOUR FEED (based on a feed budget)

1. Feed tends to be cheapest at harvest
2. Pellets can be difficult to obtain - order early
3. Work out the cheapest feed
4. Be cautious of grain feeding
5. In a dry year, stubbles and straw can be of a much higher feed value
6. Straw can be a useful addition
7. If in doubt have some feed tested for energy and protein
8. Remember that paddock feed declines in quantity and feed value even when not grazed – down to less than 50% of value after two or three months
9. Some storage of hay or straw, although costly protects against degradation and enables more precise rationing.

8. DROUGHTLOTTING

In situations where you have no paddock feed or stubble, consider droughtlotting. Droughtlotting refers to the maintenance feeding of sheep in confined areas and provides the following benefits:

• Better care of the property and soils with less land degradation (wind and water erosion)
• Quicker pasture recovery with rain
• Less feed required because the sheep do not walk as far
• Greater control of feeding and water supplies
• More simple and regular checking on the results of feeding and condition of stock.

The AWI publication, Managing sheep in droughtlots (pdf 1.11Mb), highlights the purpose, benefits and experiences of woolgrowers managing sheep in confined areas during drought.

9. FEEDLOTTING

Feedlotting refers to the confinement of sheep and feeding to increase weight and condition for increased sale returns.

Unless very special and expensive diets are provided, or the operator is very skilful, conversion ratios are commonly in the ratio of 6 to 8 of feed to one of liveweight, i.e, 14-19kg of feed to 1kg of carcase weight, making it almost impossible for feedlotting to pay when feed is at high prices.

Remember there are costs other than the actual feed, e.g, deaths, sulkers/shy feeders, water, infrastructure and labour.

The exception to this rule is where an animal is not quite finished, and its price is degraded. For example, adding 2-4 kg to a 16kg lamb in approximately condition score 2 (a store or feeder lamb) may cost more than the price received for the extra kilos, but the remainder of the initial weight is increased from store/feeder value to full value. That may justify the feeding. Remember - the original animal must be very close to prime at purchase.

Another example is Merino lambs that could be shipped at 35kg liveweight with an anticipated sale price of $50 gross which is net of commission, freight, etc, of say $45.

In Case Study 1, if you can get $31.00 for the animal before feedlotting, it is not worth putting it into a feedlot. In Case Study 2, if you can get $17.00 for the animal before feedlotting, it is better off being sold than put in a feedlot.

If the conversion ratio increased to 8:1, the feed costs increase to $16.00 and $32.00, reducing break even values to $29.00 and $13.00 respectively. Some will say that 8:1 is outrageous but it does happen, e.g, if the shipper is sold a week later than when it is ready, eating its head off in the meantime.

Do the figures very carefully, then study the literature for all the other aspects of feedlotting. It is not for amateurs, nor for less-than-dedicated operators.

10. FEEDING

The most difficult task is to appraise the quality and quantity of feed that is on offer on the farm.

There are many tools, programs and people to assist you with this, e.g. Lifetime Wool, AWI and DAFWA.

In a dry year, stubbles and failed crop can be of much higher feed value than normal. Some feed quality testing can be very worthwhile. Some of the straw feed in 2006/7 was equivalent to normal cereal hay and therefore very useful and valuable. Testing will allow good decisions on the value of stubbles and failed crop on the farm compared with selling them and using other feeds such as cereal grain.

Feed in the paddock declines in both quantity and quality over the summer even if it is not grazed. This is especially so with rain. It is worth re-appraising the feed that is available for your stock from time to time and adjusting hand feeding accordingly. Most forward estimates account for the inevitable decline in feed value.

If you decide that supplementary feeding is not an option, the following exercise may help you decide how many sheep to keep. It is based on a 2500ha farm with 1750 ha of crop and 750ha of pasture, with an average stocking rate of 4.9DSE/winter grazed hectare.

Feed demand

* Lambs born: 1280

Feed supply

In the drought year, the feed available is 31% of that in an average year. On this basis, reduce the DSE to 31% of the normal, ie, from 3665DSE down to 1148DSE.

When estimating paddock feed, allow for a residual cover of 300-400kg DM to prevent erosion and soil degradation.

Another way to match stocking rate to the drought carrying capacity of your farm is tabled below:

The effective area during drought is 27% of the farm area in an average season, therefore reduce stock numbers to 971DSE.

Neither method is perfect but it does allow some appreciation of the feed available and the adjustment to stock numbers under a normal feeding regime. That is around 1000-1100DSE instead of the normal 3665DSE.

Be realistic about feed on the property. If you know your normal carrying capacity, allowing for feed degradation over the summer, these methods can help appraise feed availability under a poor season. There are many people with the skills to assist you in this appraisal.

11. SEEK ADVICE AND HELP

Discuss the issues facing your enterprise with your family and support team. If unsure of the answers, seek assistance from your advisors. Remember to consider both short and long term planning horizons.

Seek information and support through professional channels including:

1. Drought Hotline
2. Rural Financial Counsellors
3. Your farm consultant
4. Bank Manager.

Contact an advisor who can work through your situation and help you plan for the future.

12. KEEP UP SOCIAL CONTACT WITH FRIENDS, COMMUNITY AND RELATIVES

Sustained drought has a significant impact on individuals and families. Health professionals recommend that during drought farming families recognise and acknowledge what can be a very emotional period.

Positive ways of coping with drought include:

• Taking time to be with family and friends
• Trying to keep the rest of your life as normal as possible
• Openly discussing issues relating to drought and its impact on family income
• Looking after yourself (eating properly, exercising)
• Expressing your emotions and letting your family talk about their emotions
• Taking more care when driving or working around the farm
• Remembering your sense of humour and laughing
• Taking breaks and holidays away from the farm whenever possible.

Australian Wool Innovation Limited (AWI) and Meat & Livestock Australia (MLA) engaged Bob Hall from the consultancy firm Icon Agriculture to develop key messages and tips to support decision making during drought.

These key messages are supported by a range of resources which can be accessed through the AWI website here.