| |
Business Summary
This factsheet provides economic information on establishing and operating a ewe-feeder and market lamb enterprise. This information was generated by a group of sheep producers who arrived at a consensus on investment, production, costs and revenues.
This operation consists of 310 ewes located in North Central Alberta. It is considered to be of commercial size, but not large enough to be the sole income of the operator.
This information is intended as a business planning tool. Managers need to assess all the key production and financial variables that would influence the success of their enterprise.
Production Targets
| Lambs weaned per ewe | 1.35 |
| Animal Unit Months 1(AUM) per acre | 3.72 |
Ewes are lambed on pasture in May to minimize the labour requirement. Lambs are weaned in late summer or early autumn to be transferred to a feedlot for finishing.
Sheep must have access to an adequate supply of water, with attention to the special needs of lactating ewes, feedlot lambs and sheep in hot weather.
Financial Benchmarks
| Total investment per ewe | $543 |
| . | . |
| Break even feeder lamb prices to cover: | . |
| Direct costs | $1.25/lb |
| Direct & indirect costs | $1.77/lb |
| Economic costs | $1.87/lb |
| . | . |
| Break even market lamb prices to cover: | . |
| Direct costs | $0.84/lb |
| Direct & indirect costs | $0.88/lb |
| Economic costs | $0.89/lb |
Capital Investment
This investment reflects developed enterprises and is not intended as startup venture.
| No. | Value | Investment |
| Livestock | . | . | . |
| Bred ewes | 250 | $125 | $30,000 |
| Breeding rams | 8 | $200 | $1,600 |
| Bred ewe-lambs | 60 | $125 | $7,500 |
| Replacement ewe-lambs | 0 | $120 | $0 |
| Guard/stock dogs | 4 | $500 | $2,000 |
| Total Livestock | . | . | $41,100 |
| . | . | . | . |
| Buildings and improvements | . | . | $29,580 |
| Machinery & equipment | . | . | $13,680 |
| Land (100 ac pasture + 5 ac site @ $800/ac) | . | . | $84,000 |
| Total Investment | . | . | $168,360 |
Market Factors
Alberta producers have four alternatives to choose from when they sell slaughter lambs:
- sell direct to a meat packer
- sell to custom buyers or agents
- sell through a local auction market
- farm gate sales to consumer
The relationship between finished lamb prices in Alberta, Eastern Canada and the U.S. is constantly changing. Producers need to constantly assess potential benefits of shipping lambs into distant markets.
Snapshot Enterprise Budget Sheep/Feeder Lamb Enterprise - 310 Ewes
| Projected Revenues | No. | Price | Revenues | Your Snapshot |
| ..Feeder ewe-lambs | 143 | $64.00 | $9,152 | . |
| ..Feeder ram-lambs | 202 | $64.00 | $12,928 | . |
| ..Cull ewes | 50 | $12.00 | $600 | . |
| ..Cull rams | 2 | $14.00 | $28 | . |
| ..Mature Market Animal Inventory ..Program | . |  | $1,331 | . |
| ..Wool sales | 2,400 | $0.50/lb. | $1,200 | . |
| Total Projected Revenues | . | . | $25,239 | . |
. | . | . | . | . |
| Projected Direct Costs | . | .. | . | . |
| ..Feed costs | . | . | .. | . |
| ....Hay | . | . | $9,975 | . |
| ....Grain | . | . | $2,605 | . |
| ....Salt & mineral | . | . | $1,709 | . |
| ....Milk replacer | . | . | $105 | . |
| Total Feed Costs | . | . | $14,394 | . |
| . | . | . | . | . |
| ..Bedding | . | . | $249 | . |
| ..Pasture (372 AUM’s @ $20.00/AUM) | . | . | $7,448 | . |
| ..Livestock purchases | . | . | eeee. | . |
| ....Breeding rams (3 head @ $400/head) | . | . | $$sdf$1,200 | . |
| ..Veterinary & medicine | . | . | $1,735 | . |
| ..Trucking & marketing | . | . | $1,625 | . |
| ..Machinery operating & repair | .. | . | $1,585 | . |
| ..Building operating & repair | . | . | $1,549 | . |
| ..Custom work & miscellaneous | . | . | $3,536 | . |
| ..Operating interest2 | . | . | $1,245 | . |
| Other Direct Costs | . | . | $ 20,172 | . |
| Total Direct Costs | . | . | $ 34,566 | . |
| .. | .. | .. | .. | .. |
| Return Over Direct Costs | . | . | ($9,328) | . |
. | . | . | . | . |
| Projected Indirect Costs | . | . | . | . |
| ..Taxes, licences & insurance | . | . | $313 | . |
| ..Operator labour3 (986 hours @ $12.30/hour) | . | . | $12,122 | . |
| ..Depreciation4 | . | . | $1,796 | . |
| Total Projected Indirect Costs | . | . | $14,231 | . |
| .. | .. | .. | .. | .. |
| Total Projected Direct & Indirect Costs | . | . | $48,797 | . |
| .. | .. | .. | .. | .. |
| Gross Operating Profit | . | . | ($23,558) | . |
| .. | .. | .. | .. | .. |
| Interest on Investment5 | . | . | . | . |
| ..Breeding Stock | . | . | $2,055 | . |
| ..Improvements & equipment | . | . | $727 | . |
| ..Land | . | .. | $100 | . |
| Total Interest on Investment | . | . | $2,882 | . |
| .. | .. | .. | .. | .. |
| Total Projected Economic Costs | . | . | $51,678 | . |
| .. | .. | .. | .. | .. |
| Return To Management6 | . | .. | ($26,440) | . |
Feeding Program
| . | lbs./head/day | head | days on feed | $ per tonne | Total Cost |
| Hay | 5.0 | 308 | 210 | $68.00 | $9,975 |
| Barley | 0.8 | 308 | 210 | $111.00 | $2,605 |
| Salt & mineral (breeding) | 0.05 | 308 | 210 | $670.00 | $984 |
| Salt & mineral (pasture) | 0.05 | 308 | 155 | $670.00 | $725 |
Snapshot Enterprise Budget Market Lamb Finishing Enterprise - 310 Ewes
Projected Revenues | No. | Price | Revenues | Your Snapshot |
| ..Market lambs | 340 | $69/lb.@110lb | $25,806 | . |
| ..Slaughter Market Adjustment Program | . | . | $6,800 | . |
| Total Projected Revenues | . | . | $32,606 | . |
. | . | . | . | . |
| Projected Direct Costs | . | . | . | . |
| ..Feed costs | . | . | . | . |
| ....Hay | . | . | $532 | . |
| ....Grains/rations | . | . | $5,986 | . |
| Total Feed Costs | . | . | $6,518 | . |
| ..Pasture | . | . | $0 | . |
| ..Feeder lamb purchases | . | . | $22,080 | . |
| ..Veterinary & medicine costs | . | . | $0 | . |
| ..Trucking & marketing | . | . | $1,465 | . |
| ..Machinery operating & repair | . | . | $187 | . |
| ..Building operating & repair | . | . | $188 | . |
| ..Custom work & miscellaneous | . | . | $185 | . |
| ..Feeder interest7 | . | . | $552 | . |
| ..Operating interest2 | . | . | $331 | .. |
| Other Direct Costs | . | . | $24,988 | . |
. | . | . | . | . |
| Total Projected Direct Costs | . | . | $31,506 | . |
. | . | . | . | . |
| Return Over Direct Costs | . | . | $1,100 | . |
. | . | . | . | . |
| Projected Indirect Costs | . | . | . | . |
| ..Taxes, licences & insurance | . | . | $111 | . |
| ..Operator labour3 | . | . | $308 | . |
| ..Depreciation4 | . | . | $859 | . |
| Total Projected Indirect Costs | . | . | $1,278 | . |
. | . | . | . | . |
| Total Direct & Indirect Costs | . | . | $32,784 | . |
. | . | . | . | . |
| Gross Operating Profit | . | . | ($178) | . |
. | . | . | . | . |
| Interest on Investment5 | . | . | . | . |
| ..Improvements & equipment | . | . | $422 | . |
| ..Land | . | . | $100 | .. |
| Total Interest on Investment | . | . | $522 | . |
. | . | . | . | . |
| Total Projected Economic Costs | . | . | $33,306 | . |
. | . | . | . | . |
| Return To Management6 | . | . | ($700) | . |
Notes:
- Feeder stock interest charges and feeder lamb purchases are included as if this were a stand alone enterprise. These costs would be excluded when looking at the whole farm operation.
- On a whole farm basis, returns for the market lamb finishing enterprise are as follows:
Gross Operating Profit - $ 22,454
Return To Management - $ 21,932
Feeding Program
| . | lbs./head/day | head | days on feed | $ per tonne | Total Cost |
| Hay | 1.0 | 345 | 50 | $68.00 | $532 |
| Ration (16%) | 3.0 | 345 | 50 | $255.00 | $5,986 |
Sensitivity Analysis
The profitability of a sheep operation is strongly influenced by market prices and lambs weaned per ewe.
The table below shows the changes to gross operating profit as market prices for feeder lambs, cull stock and wool prices vary.
Change in Market Prices | Return Over Direct Costs |
+ 10%.................. | $3,035................. |
0%.................. | ($541)................. |
- 10%.................. | ($4,118)................. |
The number of lambs weaned per ewe will have a significant impact on the profitability of the operation. The table below shows the change to gross operating profit with different weaning rates.
| Lambs Weaned Per Ewe | Return Over Direct Costs |
Feeder |
2.25....................... | $6,814................. |
1.35 (average)......... | ($9,328)................. |
1.0......................... | ($15,485)................. |
Definitions
1Animal Unit Month (AUM). The amount of feed consumed by one animal per month.
2Interest on operating: The interest on an operating loan, estimated at 7.75% for 6 months.
3 Operator labour: Labour contributed by the
owner-operator, valued at $10/hour. Not a cash cost.
4 Depreciation: The reduction in the value of an assets over its lifetime.
5 Interest on Investment: The cost of investing in capital assets rather than in a financial investment. Valued at 5% on all asset categories.
6 Return to Management: An amount left to compensate
the owner-operator for risk and management.
7 Feeder interest. The interest cost of purchasing feeder lambs. Calculated at 5% for 6 months.
Risk Factors
Individual operators must address the following risk factors:
- predators
- market conditions
- disease management
- weather conditions especially during lambing
Management Strategies
Key management strategies that will contribute to the production and economic performance:
- Predator control is a major factor in a sheep operation, especially one that lambs on pasture. Predation can be minimized with good livestock husbandry, two well-trained guard dogs and electric fencing.
- A nine-wire high tensile electrified perimiter fence and crossfencing is necessary to accomodate intensive grazing management.
- Sheep require shelter from the extremes of weather. This may be as simple as a shelterbelt or a windbreak. If a building is used, it must be clean, well ventilated and sanitary.
For more information, contact:
Alberta Sheep & Wool Commission
Agriculture Centre, 909 Irricana Road NE
Airdrie, Alberta T4A 2G6
Phone: (403) 948-8533
Alberta Agriculture, Food and Rural Development
Contact the Ag-Info Centre at 1-866-882-7677
Publications
The Western Canadian Sheep Production Manual
Cost: $10 + GST
Available from the Alberta Sheep & Wool Commission
The following people contributed to the preparation of this factsheet:
Alberta Sheep and Wool Marketing Commission
Dean Dyck, P. Ag., Financial Business Analyst, Red Deer
Bob Winchell, Farm Management Consultant, Airdrie
Source: Agdex FS430/821-1. Revised May 2004.
The contents of this page are no longer available.
|
|