Profitability of small ruminant production systems

Abstract Text:

The prolonged decline in U.S. sheep numbers is well documented.  Well known reasons for the  decline include dwindling U.S. demand for lamb, relative prices for competing meats, the rise of man-made fibers competing with wool, discontinuation of the U.S. Wool Incentive payment program, grazing allotment policies for public lands, and restrictions on predator control.  Another critically important force behind falling U.S. sheep numbers has been rising costs resulting in unprofitable conditions, forcing producers to reduce the size of their flocks or exit the industry.  Using extension sheep production budgets, this study examines and compares sheep production costs across various states representing conventional sheep production based on an average flock size with costs and returns on a per ewe basis. The weighted total variable cost was $124.44 per ewe in 2015 and ranged from $148 per ewe in Kentucky to $118 per ewe in Wyoming.  Receipts were the highest in the Eastern region at $179 per ewe and were the lowest in Texas at $98 per ewe.  Net returns ranged from a -$41 to $21 per ewe in Texas and Kentucky, respectively.  Costs between regions reflected significant differences in production systems.  For example, feed made up just over 50 percent of total variable costs in Texas and 22 percent of total variable costs in Wyoming.  Hired labor made up 37 percent of total variable costs in Wyoming or $44 per ewe.  Predator control costs were $10.50 per ewe in Texas but only $1-$2 in the other regions.  The results highlight the variable nature of the cost of sheep production and the range of production systems across the country. Policy changes that affect hired labor costs, for example, affect Wyoming and Western region production more than smaller flocks in the East with little, if any, hired labor. New technologies or predator control systems would be likely to see the greatest returns in Texas and the Southwest or in the Mountain West.  Changes in public land grazing policies would have the biggest effect in the West.  Positive returns in Kentucky indicate opportunities for industry expansion in the Eastern half of the U.S.

Keywords: sheep, cost of production, net returns, production systems