In Australia, Merino sheep generally graze and reproduce in extensive grassland systems, characterized by limited feed resources. Under resource limited circumstances, the environment can influence the expression of genes and the health of individuals and constrain ability of individuals and collectives to express genetic progress. Genetic selection has improved productivity of animals represented in the Sheep Genetics database and genetic trends for traits are improving in the stud environment where they are measured. However, on-farm benchmarking data suggests that high index sheep are not necessarily the most profitable when managed in commercial conditions with limited resources. <br/> The project was carried out by a multi-disciplinary team that involved physiology, genetics and economics. The project focused on the energy requirements associated with increasing production and the implications of increasing energy requirements in a resource limiting environment. A summary was compiled of the genetic parameters that had been published for the production traits and the traits related to energy (liveweight, body condition score, fat and muscle measurements and intake). Published literature was also reviewed regarding the physiology of increasing CFW and the evidence regarding the energy requirement of increasing CFW. These findings from the physiology review where used in an economic modelling study to quantify the relative economic value of production traits and to identify traits that might be useful to increase profitability in a resource limiting environment. The breeding objectives developed were then compared with the standard MERINOSELECT industry indices. Profit equations were also developed to determine if it was possible to develop an approach to quantifying relative economic values of traits in a resource limiting environment that is more simple than whole farm economic modelling.