Following a brief visit in August, Independent analyst Andrew Woods of Independent Commodity Services provides an overview of the sheep and wool industry in Patagonia, its challenges and potential solutions.
Walking from the plane at the airport in Trelew, in north-east Patagonia on the Atlantic coast, it feels similar in some ways to the landscape of the One Tree Plane between Hay and Booligal. Only it is drier and far more vast, with a 100 metre plateau on the horizon. Patagonia accounts for around 70 per cent of the sheep in Argentina, so to see the sheep and wool industry in Argentina requires a visit to this great southern region of South America.
Patagonia is located at the bottom of South America, extending into Argentina and Chile. It has the Andes Mountains running down its western side. It is approximately the size of NSW with a sheep population in the order of Western Australia, around 8 million. Its northern latitude is close to that of northern Victoria with its southern latitude extending well below New Zealand.
Over the past century, sheep production has gradually been pushed out of regions north of Patagonia by beef and cropping. Cattle and sheep can be run in the sliver of higher rainfall country running along the foothills of the Andes where rainfall is higher around 600mm per year, with a carrying capacity in the order of 0.61 sheep equivalents per hectare.
In southern/central Patagonia the rainfall drops to around 100 mm per year, with the carrying capacity (understandably) falling to around 0.12 sheep equivalents per ha.
In the northeast, the rainfall increases to around 200 mm per year, with the carrying capacity rising to 0.28 sheep equivalents per ha.
As in Australia, the rise of sheepmeat prices during recent decades has changed the way Argentines view the sheep enterprise. Income was 80 per cent derived from wool in Patagonia, and is now 20 to 30 per cent.
As in Australia, costs have risen. During the past four years, on Estancia Tatay (a grazing property I visited), per head costs have risen from US$20 per head (variable and overhead costs) to US$28, plus $US6 for supplementary feed.
On-farm issues
At Estancia Tatay, the following problems were outlined to us on our visit;
- The legacy sheep genetics, with a big focus on Corriedales and broader Polwarth/merinos has lowered profitability especially after crossbred wool prices crashed in 2020.
- Low production native pastures given the low rainfall across much of Patagonia leads to poor nutrition, poor weaning rates (around 30 to 40 per cent In the drier parts of Patagonia, climbing to 70 per cent in the better parts), lamb weights and tender wool
- Guanacos, which are feral herbivores whose population has increased markedly during the past three decades. This is a problem as it adds uncontrolled grazing pressure.
- Predators, such as pumas.
- There have been quite a few of the smaller farmers abandon the land, which is becoming a problem as pumas and guanacos are spreading east across the deserted farming land.
Potential solutions
And here are some of the solutions to these problems they are working on:
- Genetics: moving finer while looking towards sheepmeat production. Finer Merino genetics are being used to lower micron, from a Corriedale/Polwarth base. Tatay has their average Merino fibre diameter down to 18.5 micron with a yield around 65 per cent in the fleece.
- Trialling supplementary feeding to help with sheep condition, weaning rates, lamb weights at sale (12 to 13 kg instead of 9 to 10 kg) and wool quality (higher staple strength), at this point costing around US$6 per head per year.
- Maremmano dogs are showing potential to help protect against pumas, acting as a deterrent.
For the guanacos, no solution yet has yet been developed. They need exclusion fencing to keep them out, which is too expensive for these farming systems.
The way forward
Off-farm, one of the key problems facing the wool industry in Patagonia is a lack of transparency. There are four main buyers in Patagonia who act as brokers/exporters and early-stage processors. They buy whole clips, tendering an all-in average price which means mills tend to accumulate “bits and pieces” of clips. Once the volume of these off types is large enough, a sale is made. It is a clunky way of buying wool, and farmers will ultimately pay for this in the price received.
Argentine farmers look to the Australian market for price ideas for their wool. A lack of a central clearing market prevents farmers from collecting price and wool data to build up enough data by which to establish their basis to the Australian market. In addition, not all lots have the full suite of objective measurements carried out. On this latter point, Chinese mills using Argentine wool report inconsistencies in objective measurements such as yields, which will be ultimately paid for by Patagonian wool growers.
Responsible Wool Standard (RWS) accreditation is preferred by the mills, as it allows them to makes sales in this difficult market, even though they are not receiving a RWS premium for their wool tops.
While there are no shortages of challenges to the sheep and wool industry in Patagonia, the National Agricultural Technology Institute (INTA), the Argentine organisation for agricultural research and extension, has a clear vision for the wool and sheep industry in Patagonia.
The absence of Lucilla cuprina (sheep blowfly) means an absence of mulesing which allows an easier path to certification for animal welfare such as RWS; a comparative advantage.
Wool certification (RWS and organic) allows for Patagonian wool to be part of the sustainability trend in international markets.
Genetics offer a path for farmers to improve sheep and wool production moving the Merino clip to a finer fibre diameter complemented with meat production.
Support services for the improvement in wool production depends on the availability of objective measurements (AWTA in Australia) of wool.
Finally, the integrity and reliability of wool and meat supply chains from farm to export needs to be improved and maintained for Patagonia to be a reliable supplier to domestic and international markets.
INTA is under budgetary pressures from the Argentine government. It would be a shame that an organisation with a clear, workable plan to help the Patagonian sheep and wool industry progress at this difficult time is prevented from doing so. The international wool industry needs as many regions to prosper as possible in order to maintain volumes.
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