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Fine wool production is a small but increas ingly important indust ry in New Zealand. To minimise the effects of f luctuat ions in world f ine wool supply and demand, New Zealand must concentrate on quality. Results of a comparison with Romney ewes and lambs on hard hills at the Wanganui Hill Research Area, show that Merinos have performed well. Although flystrike and a lower tolerance to internal parasites were observed, predicted feet and wool quality problems did not eventuate. Any special management required has been more than compensated for by the 48% higher gross margins achieved in 1988-89 ($25 .90 per s tock un i t o r $337/ha from Merinos). Throughout the 1980s even when SMPs supported high lamb prices, Merinos would have been a bet ter proposi t ion than pr ime lamb. Al l farmers , especial ly those changing to Merinos , need to concentrate more on wool quality and quantity rather than lambing percentages and lamb weights. A Merino enterpr ise can be entered in two ways . Buying Mer inos has a high initial cost, but the financial benefits are immediate and can be budgeted with more confidence using recent pr ices . Using Merino rams over crossbred ewes is a low cost alternative which is much slower (15 years), but the financial gains, although present from year 1, are much reduced, par t icular ly in the ear ly years . In North Island hill country where inputs are low, Merinos are proving to be a profitable diversification option. The increase in d isposable farm surplus of $33,100 in the 1989/90 year from a 3200 sheep stock unit hill country farm, has been much needed by farmers in recent years, and may have saved some from having to leave farming.

Merinos - a profitable diversification option for most North island hill country