Merino economic overview for the past decade - Merino South Africa

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Sufficient money was generated for the producers to build their. Merino stock numbers. Figure 2: ... economic drivers ge
Merino Management

Merino economic overview for the past decade (2003 – 2013) AC Geyer

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he Merino has proven itself as a money spinner for many years. Over many decades the Merino carried an enormous number of farmers through extremely difficult times. The breeding of the Merino was adopted over time to supply the required products in demand. The study groups provided production- and reproduction norms and financial information to support the producer in his decision-making process. Reliable economic knowledge is imperative for strategic management purposes. This article focuses on the past 10 years of reliable Merino economic study group results. The main objective is to show some trends to illustrate that the Merino has proven itself as one of the most economically viable woollen sheep breeds in South Africa over the last decade.

It is very exciting to realize that a decade back, 2002-2003, the main income from Merino sheep came from wool. Wool contributed 60.92% of the generated income. Figure 2 illustrates that meat contributed only 39.08% of the total income of a Merino sheep in the Cradock area. The Cradock area averaged a gross margin for extensive Merino farming of R 190/SSU for the 2002-2003 season.

Figure 3: Gross Margin samples for the Merino in the Karoo and Eastern Cape areas 2005-2006.

The results in Figure 3 represent the study group results of only two seasons later than the results in Figure 1. The rand/SSU for the Merino increased since the 2002/2003 season, indicating that there was a good demand for wool. The areas of Rietbron, Klipplaat, Noupoort and Tarkastad were all practising extensive Merino farming. The results in Figure 3 indicate that good money was raised with Merino.

Figure 1: Gross Margin samples for the Merino in the Karoo and Eastern Cape areas 2002-2003.

Figure 1 illustrates that the gross margin (Rand/ SSU) differed from area to area. The gross margins of Beaufort West (R212.43/ SSU), Kommadagga (R206.75/SSU) and Pearston (R221.51/SSU) represented extensive Merino farming. Somerset East (R260.42/ SSU) was farming on irrigated lands and extensive veld. Clearly a higher gross margin resulted from better grazing conditions. Sufficient money was generated for the producers to build their Merino stock numbers.

Figure 4: Gross Margin (Rand/SSU) averages from the 2008/09 season up to 2012/2013.

The results in Figure 4 illustrate that since the 2008/09 wool season until the current 2012/2013 wool season, an annual increase was recorded. What is extremely important is the fact that income ratio for wool and meat has changed drastically since the season of 2002-2003 where wool was the main money maker.

Figure 2: Cradock 2002-2003 wool and meat ratio.

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Merino Management 4 increased gross margins occurred annually. From the 2010/11 season an average increase of 13.59% was recorded by the Merino farmers. From 2011/12 season up till the 2012/13 season another average increase of 14.21% occurred.

Figure 5: The average Merino wool and meat ratio from 2009/10 up till 2011/12.

In Figure 5 it shows that the 3 year average proves that wool is contributing 32% of the income for a wool farmer and meat is contributing 68% of the income. That is the total opposite of the situation in 2000-2003 where wool was the main contributor to the income of Merino. It is clear that wool and meat are the main economic drivers generating income for the Merino. In Figure

The Merino is dominating the wool market in South Africa and it has clearly outperformed the other fibre producing breeds. It is important to note that although meat is contributing almost 70% of the income, the demand for wool needs to be maintained. The demand can only be increased if the producer delivers the type and quality of wool in demand securing very good wool prices. The major wool characteristics of fibre diameter (fineness), length, soundness (tensile strength) quality and clean yield play an important role in the price determination of wool. The wool income creates the opportunity for generating enough funds to cover a large amount of the meat factor costs. Therefore the wool price covers a lot of other non-wool related costs resulting in high profits for the Merino. The outstanding wool quality together with good meat prices resulted in the Merino sheep being one of the most profitable sheep breeds in South Africa. Over many seasons, the Merino has never let the farmer down. The Merino sheep is the proven breed for the future!

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