Skin in the game

Lamb producers who have their sights set on meeting carcase quality and weight targets can also pick up value by adjusting management strategies to produce premium skins.

The spin on skin

Co-products such as skin, wool and hide can be an overlooked sector of the red meat industry, but they contribute to Australia’s reputation as a supplier of quality products into export markets.

According to the latest MLA markets report, lamb skins are averaging 900ȼ/skin. Prices increased in January after staying at around 700­–750ȼ/skin since June 2017.

Last year, Australia exported more than $377 million worth of raw sheep and lamb skins, with 92% going to China.

Dennis King, executive officer of the Australian Hide, Skin and Leather Exporters Association, said the skin trade can be influenced by social and political factors.

“The fashion industry is particularly susceptible to influence from activist groups and, in recent years, we’ve seen big global brands move away from using leather products in favour of synthetic alternatives,” he said.

“While this has had an effect on demand for hide, the market for lamb skins remains strong.”

He said the pending elimination of a 7% tariff on sheep skins by 1 January 2019 under the China–Australia Free Trade Agreement is also not expected to have a significant impact.

“Australia and New Zealand are the main producers of sheep skins, so the volume of product cannot be sourced from other countries," Dennis said.

“In terms of quality, Australia produces a superior product, so our market should remain secure.”

On-farm influence

Simon Matters, who manages Thomas Foods International’s skin, hide and wool division, said around 60% of lambs processed by the company will make the cut for the premium skin market.

He said, with prices usually dropping by $2–3 between each of the three grades (premium, which can include up to 10% seconds, thirds and fourths or crossbreds), it is worthwhile for producers to ensure animals are presented in the best condition.

“The ideal lamb skin will have at least half an inch (1.2cm) of fine, dense wool – this is crucial for the premium market, as these skins will be used for high quality garments and underlays.”

Simon said producers he speaks to are interested in how they can achieve more value for their skins.

“Best practice management on-farm for fine wool tends to flow through to skin value as customers pay a premium for finer microns and unmarked hides,” he said.

“For example, grass seeds used to be a big issue, but generally Australian producers are doing a good job at eliminating grass seeds – pasture management has been a godsend to the skin industry.

“We also see fewer black points. Black wool cannot be dyed out, but producers are reducing this problem with genetic selection to produce more consistently lighter skins.”

Producers who keyhole-crutch are also more likely to receive a premium, as crutching above the tail reduces the size and shape of the skin.

Weather discolouration to the tip and staple of wool can have a detrimental effect on skin value, as this cannot be dyed out, and shearing cuts and branding fluid also reduce skin quality.

“Australia has a reputation for producing premium skins – our skins are highly sought after and it’s important we retain this status,” Simon said.

Skin purchase

Skins are valued on the live animal to determine skin size and quality.

Buyers submit their prices in a daily tendering process at the abattoir. After they are purchased, skins are salted and sent to the buyers’ warehouse for grading, based on pelt type and wool quality.

Skins are then packed and shipped to tanneries in China, Russia and Turkey.

Paul Fitzsummons, PKF Sheep Skins Valuations principal, buys skins from across southern Australia.

He said although most producers are on the right track and, for example, have reduced the skin damage caused by flystrike, he would like to see fewer skins with medullated fibres as these are not suitable for premium wool-on products.

He also advises producers to shear before seed-set and to move sheep to clean pastures to reduce the occurrence of grass seeds.

“With reduced flock numbers and increased cross-breeding, it’s hard to get a good, dense wool product for the premium apparel market,” Paul said.

“If producers want to value-add their lambs, they can aim for a premium skin by breeding out medullated and dark fibres, and reducing grass seeds and burrs, as these cause scarring which presents as a light-coloured mark on the skin.”

These marked skins are only suitable for products such as car seat covers, footwear linings or chamois, as customers don’t want visible hide damage on products such as Ugg boots or sheepskin jackets.

Tips for sheep producers on how to help the premium sheepskin market

• Sell lambs with an even 1.2–1.5cm of fine, dense wool covering.
• Use genetic tools to reduce the impact of dark and medullated fibres.
• Avoid grass seed and burr infestation.
• Carry out neat keyhole crutching.
• Reduce skin discolouration from weather exposure and branding products.

Information:
Adam Cheetham
MLA Global Market Analyst
Email Adam Cheetham

Simon Matters
Email Simon Matters

Paul Fitzsummons
Email Paul Fitzsummons

Dennis King
Email Dennis King 
MLA Market Insights: mla.com.au/market-insights
Australian Hide, Skin and Leather Exporters Association: ahslea.com.au