Most Australian farm businesses specialising in wool production are operating at a loss at current wool prices. After both short term operating and long term costs of capital depreciation are accounted for, only a small number of wool growers are able to make a profit with the wool market indicator below 500c/kg.
Poor prices have stimulated wool growers to review their operations and look to ways of improving cash flow in the short term, such as diversifying into cropping. The downturn should also prompt growers to address the longer term trends of declining terms of trade and historically poor productivity growth in the sheep industry relative to cropping specialists.
This article evaluates the potential gains to be made by diversifying into high yield cropping. It also examines several possible ways that wool growers can address the declining terms of trade. These include productivity improvements, increasing farm size to attain economies of scale, and increasing prices received for products through improving quality and marketing.
van Bueren, Martin and Young, John
"Tough times call for a review of farm business performance,"
Journal of the Department of Agriculture, Western Australia, Series 4: Vol. 35
, Article 5.
Available at: http://researchlibrary.agric.wa.gov.au/journal_agriculture4/vol35/iss1/5