Sheep leasing and perennial pastures
Promotion of sheep leasing and perennial pasture development by the vertically-integrated company may have flow-on effects for the industry. Farmer access to capital for flock expansion may come in the form of sheep leasing based on the ‘Cowbank’ model that, if applied to WA, could conserve farmer capital of almost $200 million over ten years and reduce livestock financing expenses. Cowbank funds the purchase of a dairy herd where the value of the cows comprises 20% of the total capital required for the dairy operation. Cows are owned by Cowbank and leased to the farmer over five years with monthly payments and a 20% residual payable on completion of the lease term. Cowbank is now able to attract funds at more competitive interest rates than trading accounts.
Application of the Cowbank model to the sheep industry:
- applicable to farmers with existing self-replacing flocks wishing to rapidly expand
- farmers select their preferred flock and identify for audit purposes
- lease payments would have to be aligned with income i.e. shearing and lamb sales
- the lease term would reflect the age of the flock purchased (maximum term five years)
- a residual payment of 20% on completion of the lease term appears appropriate
- an annual audit of the flock and replacement ewes would be required.
Perennial pastures were examined as a means to increase the productive capacity of poorer land generally unsuited to cropping, providing a local comparative advantage to pasture-based livestock enterprises in parts of WA.
Sub-tropical (C4) perennial grasses sown in the low-frost areas of the Central West and South Coast of WA could utilise low value land (unsuited to cropping) and boost pasture productivity by 300% on average (anecdotal evidence from farmers) compared to annual species. Whole farm profitability would need to be confirmed by detailed whole-farm modelling.