February 2015
For What It's Worth

Cost of Production and Returns: Meat Goats versus Hair Sheep

This is a follow-up article from a few months ago that introduced the concept of raising hair sheep. The intent of this article is to highlight costs of production and potential returns regarding raising meat goat versus hair sheep. The numbers and calculations are based on a typical commercial operation. This information should help you make better-informed decisions based on what may be appropriate for each situation. Comparisons are made using the Alabama Meat Goat Enterprise Budget developed by Auburn University’s Department of Agricultural Economics and Rural Sociology that can be found at http://www.ag.auburn.edu/agec/pubs/budgets/Meatgoats.php.

Livestock enterprise budgets are designed to assist in estimating the potential costs and returns for various livestock enterprises. They are practical estimators and not absolutes. Prices and costs are based on the best estimates available when the budget was developed. Because of the wide variety of alternative inputs, locations and production systems, situations will vary from farm to farm. There are a multitude of enterprise budgets to be found.

For the sake of time and space, we will assume items such as capital investments, fixed costs and herd information are basically the same for both species. Therefore, our focus compares gross receipts, variable costs, income above variable costs and net returns to risks and management. To include entire sets of tables would take up too much space. See the following comparisons, table and discussion that follow.

 

Herd Information – Includes the number and average weight of does and bucks in the operation. It also has the number of kids that are marketed (sold) and average weight of kids sold. There are certain rates such as conception, kidding/lambing and mortality.

In this situation we will assume the goat and sheep farmer both have: 50 does/ewes, two bucks/rams and 69 kids/lambs for sale at 80 pounds. Each herd will have 10 percent mortality for young and conception rates are equal.

Gross Revenues – This is the amount the producer receives from the sale of the market/breeding kids and any cull animals sold.

For this situation we will assume year-round market prices for kids are $2/lb. and market price for lambs is $1.65/lb. Same number of bucks/rams and does/ewes culled and sold at equal prices. We are assuming four trips to markets per year at 100 miles round-trip. Subtotals for gross revenues: goats, $11,687.30; sheep, $9,761.74; price differences were the primary factor.

Variable Cost – These are out-of-pocket costs associated with producing the animals. Some of the costs include hay, feed, pasture costs (fertilizer, lime, seed, etc.), medicine, marketing costs, transportation, etc. Land rent and labor are also included. It is assumed labor will be provided by the producer.

Initially some things started out equal: consumption rate for hay and mineral, and cost of hay, pasture and mineral. Then situations started to vary: (1) months on hay – goats, five; sheep, four; (2) months on concentrate – goats, eight; sheep, six; (3) feed prices – goats, $26/100 wt.; sheep, $22/100 wt.; and (4) health costs for worming – goats, six times/yr.; sheep, four times. Vaccination costs were equal.

All this is based on the assumptions sheep are more likely to graze while goats are more likely to require extra hay and feed; nutrient requirements for sheep are slightly less than goats, and protein is one of the most expensive ingredients in feed; and goats tend to require more frequent worming than sheep so worming costs are slightly less for sheep. Variable cost subtotals: goats, -$11,278.57, sheep, -$8,155.55; difference of $3,123.02.

Income Above Variable Costs – This is gross receipts minus total variable cost. This measurement allows the producer to determine if revenues covered out-of-pocket costs. Goats – $408.73, sheep – $1,606.19; a difference in favor of sheep is $1,197.36.

Fixed Costs – These costs are incurred whether you produce or not. These include depreciation, interest, insurance, property taxes, etc. These costs may be difficult to allocate to a specific enterprise. Some of the fixed costs do not require a payment such as depreciation, but the assets depreciated must be replaced. Fixed cost includes a charge for land and general farm overhead. Even if the land is owned, there is a cost involved. This cost may be the opportunity to rent the land or just the property taxes.

There was one minor variation here. All in all, things were the same: housing and fencing costs, equipment and supplies, land and general overhead. However, with less worming required, the labor costs for sheep were also slightly less.

Net Returns to Risks and Management – If the figure is positive, the producer will be rewarded for his management efforts and the entrepreneurial risk he has taken, and considered profitable. This is the figure that management should use to make decisions and compare alternatives.

This is where the big difference shows up, but negative is negative: Goats -2,640.42 and sheep -$1,349.27 with a difference $1,291.15.

In compiling this information, here are some comments. Enterprise budgets and numbers will vary from source to source. In many situations, costs of production (variable and fixed) are very similar. However, when it comes to requirements for feed and hay, nutrients and worming frequencies, the overall cost of production for hair sheep tends to be lower. Feed and hay costs can be greatly reduced for either species by insuring year-round availability of quality forages. Some producers may feel it is easier to raise hair sheep than goats, and marketing opportunities will vary. The reality in this situation is, without significant improvements in strategies, neither venture is profitable.

Robert Spencer, Max Runge and Robert Page are all with Alabama Cooperative Extension System.