New gross margin calculations have shown sheep enterprise profitability almost doubled in 2025, with strong livestock prices driving significant gains across all major production systems.
Recent analysis from the NSW Department of Primary Industries and Regional Development (DPIRD) found average sheep enterprise gross margins increased to $43.73 per Dry Sheep Equivalent (DSE) in 2025, compared with $24.53 per DSE in 2024.
The self-replacing Dorper enterprise emerged as the highest-performing sheep enterprise, delivering a gross margin of $60.43 per DSE, followed by 1st Cross ewes joined to terminal rams at $53.70 per DSE.
NSW DPIRD Sheep Development Officer, Geoff Casburn said, a substantial increase in sheep sale income was the primary driver behind the improved results last year.
“2025 was an exceptionally strong year for sheep enterprises, largely due to higher livestock values across a range of classes, including slaughter lambs, surplus ewe hoggets and Merino wether weaners,” Mr Casburn said.
“The self-replacing Dorper enterprise experienced the best of both worlds, benefiting from strong slaughter lamb prices and increased surplus ewe values while maintaining the lowest costs across all enterprises at $31.87 per DSE.
“The next-best result came from 1st Cross ewes joined to terminal rams, highlighting the continued strength of prime lamb production systems.”
Merino enterprises also recorded strong improvements in 2025, with the self-replacing 20-micron Merino enterprise achieving a gross margin of $50.46 per DSE, while the 20-micron ewe enterprise joined to terminal rams returned $49.70 per DSE.
The analysis found sheep sale income increased substantially compared with 2024. Sheep sale income for self-replacing 20-micron and 18-micron enterprises increased by 102 per cent and 91 per cent respectively, while slaughter lamb values rose by approximately 37 to 42 per cent.
Mr Casburn said wool income also improved, although gains were more modest than those achieved through livestock sales.
“Merino enterprises recorded wool income increases of between seven and 12 per cent, while the 1st Cross ewe enterprise achieved a 25 per cent increase in wool income,” he said.
“While livestock sales were the biggest contributor to improved returns in 2025, wool remains an important component of enterprise profitability.”
The gross margin analysis found that for the 18-micron self-replacing Merino enterprise, wool contributed around 28 per cent of total income under 2025 assumptions. Using average wool values achieved during the first half of 2026, wool’s contribution would increase to 49 per cent of income, lifting the gross margin from $49.47 to $66.23 per DSE.
The analysis also highlighted the importance of managing enterprise costs, with replacement purchases and wool harvesting, remaining the two largest cost categories for most sheep businesses. Wool harvesting accounted for approximately 28 per cent of total costs in Merino breeding and wether enterprises, while replacement purchases represented 38 to 40 per cent of costs in enterprises relying on purchased replacements.
“Gross margin sensitivity analysis shows how strongly enterprise profitability can respond to changes in production and market conditions,” Mr Casburn said.
“For example, in a 1st Cross ewe enterprise, increasing weaning percentage from 118 per cent to 148 per cent lifts the gross margin from about $54 to more than $72 per DSE.
“Similarly, a 50 per cent increase in adult wool value doubles the gross margin of an 18-micron wether enterprise.
“Strong livestock markets have underpinned excellent returns during 2025, but producers should continue to monitor costs, productivity and market signals to maximise profitability and build resilience against future fluctuations.”
NSW DPIRD publishes 10 sheep gross margin budgets covering a range of wool, meat and dual-purpose enterprises. The budgets are based on average prices and costs from April to September 2025 and are designed to help producers compare enterprise performance and test the impact of changing assumptions.
To view the full list of sheep gross margin budgets and a more detailed analysis of returns for 2025, please visit NSW DPIRD website.
