1. Wool in the Cross Hairs Graham Peart

2. Sheep & Wool Still a Major Rural Industry Farmers –35,902 farms run sheep Income 2003/04 (export) –Wool = $2.8B –Meat, live & skins = $1.3B –Cattle = $4.1B –Wheat = $3.4B } = $4.1B vs

3. Recent Trends - Wool Sheep numbers down 49% since end of floor price (1991) Wool production down 37% since end of floor price (1991) Wool Micron down 0.9µm and fine wool 10% to 30% of clip Merino Ram Sales down 41%, Queensland down 60% Micron Premiums down from 25% to 6% (2000 to 2005) Wool Prices down approx 40% (2002 to 2005)

4. Real Wool Prices & Sheep Numbers National Average Auction Prices – Greasy - ABARE

5. Australian Shorn Wool Production 0 200 400 600 800 1000 1200 1985/861986/87 1987/88 1988/89 1989/90 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 (f) Shorn wool production (mkg greasy)

6. Australian Wool Sold at Auction Volume by Micron – AWEX Data 2006

7. Micron Premiums 1995 to 2005

8. Stud Merino Rams sold by State Australian Association of Stud Merino Breeders

9. AWEX Wool Price Indicators (1994 to 2006) Northern Indicators for 19, 21 & 23 micron (cents / kg clean) as at 24 February 2006

10. Recent Trends - Meat World Sheep Meat Production up 13% (1991 to 2003) Australian Lamb Exports up 287% (1984 to 2005) % of Lamb Exported up from 13% to 44% (1984 to 2005) Lamb Prices up 56% (1985 to 2005) Mutton Prices up 270% (1985 to 2005)

11. Joining Intentions

12. Joining Intentions (1996 to 2005) Ewes joined dropped 7.5% Merino Ewes joined dropped 14.3% Ewes joined to Merino Rams dropped 22% National Flock Merino Ewes 85% –Joined to Merino Rams – 74% –Joined to Dorest Rams – 11.7% –Joined to Suffolk Rams – 5.7% –Joined to Border Rams – 3.6% –22 other Breed Rams – 4.9%

13. New Breeds SAMMs, Dohne, Dorper, Dammara Characteristics New breed hype WA study (2005) Farm Profit –Peppin Merino = 100% –SAMM = 97.6% –Dohne = 96.1% Economic and climate - niche

14. Profitability of Sheep Enterprises Merino Wethers: less profitable than ewes Micron v Profit: 19µm more profitable than 21 or 23µm Most profitable: high performance 21µm ewes with wethers for meat or Merino ewes 21µm 100% to meat rams Wool-less sheep: 25% below best Merino returns

15. DPI Sheep Gross Margins 2006 Budgets

16. Sheep v Beef Gross Margins / ha 1969 to 1998 GRAS Data – Wheat / Sheep Zone Long term Merino GM = $23/ha Long term Beef GM = $17/ha

17. Enterprise Substitution Within sheep: move to more meat while retaining wool Sheep to Cattle: 10yr trend, likely to end. Sheep returns similar / better. Sheep to Crop: 10yr trend, likely to end. Machinery and chemicals pushing a return to sheep. A 20% increase in GM$/ha needed for farmers to move

18. Productivity growth IndustryProductivity Growth % Terms of Trade % Loss / Gain Sheep Producers1.6-1.3+0.3 Prime Lamb 5 to 20% of receipts 2.1-1.3+0.8 Specialist Sheep producers 2.2-1.3+0.9 1977 to 2002 1988 to 2002 ABARE 2005

19. Productivity Gains 25 year figures: –Sheep Negative –Beef Fair –Crop & Dairy Good 14 year figures –SheepFair –Sheep specialistsGood

20. Options for the future Superfine wool sheep –Good technology to drive genetic progress –Specialist Enterprise – 16 to 17µm –Expansion in high rainfall tablelands Medium wool dual purpose –Good index selection to drive multi-progress –19µm high fertility, heavy cutting sheep –Pastoral zone with meat finishers Meat only sheep –Potential to save mustering and shearing costs –Yet to prove potential –Niche in Pastoral zone

21. Seed Stock Production Studs mostly small 1850’s English system to enforce breed standards SGA to drive modern genetics in all breeds Meat – move to composite rams Wool – move to specialist streams bought on EBV’s

22. Research Needs Motor bikes, poly pipe and B doubles – major breakthroughs. Wool for Wealth – AWI. First major attempt to measure integrated benefits. Little research focus on generating new within enterprise profits. Profit focused integrated research teams needed to lift fee paying farmer’s returns.

23. The Future New counter cyclical investors into sheep and wool. Merinos to split into two major streams. SGA to play a major role in efficient index selection. Seed stock industry ripe for new innovative investors. Meat to move towards composite rams. Industry poised to lift productivity and profits.