Price risk exposure of Australian Merinos – is it in the bloodline?
2014
Behrendt, Karl
Sheep producers and their advisors utilise Australian Merino bloodline trial data to guide future sheep breeding objectives and ram selection. To adequately assess the economic outcomes from different bloodlines in the decision making process, there is a need to consider the impact of wool and sheep meat price risk. Using a steady-state wether flock model that accounts for the lifetime productivity of 268 reported Merino bloodlines and stochastic dependency in weekly wool and sheep meat prices from 28 June 2005 to 10 November 2011, gross incomes per dry sheep equivalent (GI/DSE) were calculated for a weekly time step. The analysis found that across all bloodlines and market price scenarios, GI/DSE ranged between AU$13.92 and AU$67.83, with an overall mean of AU$32.60. The individual means of bloodlines across the time series ranged from AU$37.46 to AU$25.19 GI/DSE. The coefficient of variation, used as the measure of relative risk for each bloodline, ranged from 0.24 to 0.30 with a mean of 0.25. The analysis showed that a bloodlines exposure to price risk has a curvilinear relationship to fibre diameter and fleece weight. The results from a risk-reward point of view indicate that the majority of Australian Merino bloodlines are risk-inefficient. This suggests Australian sheep producers have a significant opportunity to increase net returns and reduce price risk exposure by identifying and switching to more risk-efficient bloodlines.
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