Ollila encourages producers to be specific in sheep share arrangements
Like other segments of agriculture, the sheep industry is also exploring ways to keep its business viable in the future. The amount of capital needed to make a go in the sheep business makes it prohibitive for many young producers to get started.
According to David Ollila, South Dakota State University Extension sheep field specialist, some young producers are seeking older producers nearing retirement as a resource to help them get started in the business. If the two can pair up and develop a suitable arrangement, many times the young producer can obtain a flock on shares, Ollila said.
“We are seeing more interest in sheep share arrangements as our producers are getting older and looking for someone to take over,” he said. “Many of them don’t have family members to take over, so they are looking for younger producers who want to be involved in the sheep business with the older generation serving as their mentors.”
The share arrangement can vary depending upon what each producer can bring to the table, Ollila continued.
In one common scenario, the older producer was able to supply everything, except the labor.
“He was wondering what percentage of the lamb and wool crop should be given to the other producer for supplying the labor,” the sheep specialist explained. “I have figured that is worth a 15 to 25 percent return, but I encourage the producers to do some profit sharing on anything above that to reward them for better management and labor.”
It is also common to see situations where the older producer supplies the livestock, and the producer taking the sheep on shares provides everything else. In that situation, the share arrangement would be closer to 60 to 70 percent for the person taking the sheep on shares, Ollila said.
“I would be very hesitant about leasing my ewes out to someone unless they have a lot of background knowledge with sheep because they can be more difficult to manage at times, especially at lambing and controlling predation,” according to Reid Redden, North Dakota State University Extension sheep specialist. “These two things can have a tremendous impact on the percentage of the lamb crop.”
“I would also make sure they understand what it takes to manage sheep and have all these things identified within a contract,” he continued. “I would start with the owner producer getting a 75 percent share of the crop up to 100 percent of the lamb crop, and the share producer getting 25 percent.”
“That would flip-flop on anything above 100 percent lamb crop. I think it would benefit both parties, because it would provide a lot of motivation to keep that lamb crop percentage high and keep a lot of lambs alive because for the share producer, their percent gross above 100 percent triples,” he explained.
“There are two sides to these arrangements,” Ollila stated.
“When considering a share arrangement, the owner of the sheep typically has a good, solid, uniform group of highly productive ewes, and they didn’t get that way by accident,” he explained. “He will want to make sure that if he puts those ewes out on shares, when the arrangement ends he is getting those sheep back.”
“An older producer will be worried about finding someone who won’t hurt the flock he has developed,” Ollila summarized. “If producers know what their ewes can do, they should also have an expectation of what another producer should be able to do with those ewes based on his facilities, education and management.”
Ollila said if a producer is considering a share arrangement, he would encourage them to evaluate the background, knowledge of and experience with sheep, the support system, availability of mentors, facilities and sheep health program of anyone he is considering leasing his flock to.
On the other hand, someone who is interested in taking sheep on shares needs to look at the producer, how he has previously managed the flock, the genetic potential of the ewes and their lambing history.
“A young producer needs to be looking for a good, healthy herd from a producer with good records of what those ewes are able to do,” he said.
In range areas, Ollila said it is common practice for producers to have Rambouillet-based ewes that typically produce a 120 percent lamb crop and high quality wool. White-face ewes can develop higher quality wool because they live in cleaner conditions where they aren’t consuming hay and other feeds that become entangled in the fleece.
“Their diet on the range gives them the opportunity to develop finer, high quality wool,” he said. “They also have excellent longevity and tend to live longer than their counterparts.”
In farm flock areas, producers tend to breed white-face ewes to black-face rams for hybrid vigor. Those speckled-face ewes become the base of the flock, and they are then bred back to black face rams.
“Those crossbred ewes will raise some fast-growing, healthy lambs,” he said. “They will sacrifice wool quality, but the ewes have more multiples and can produce upwards of a 200 percent lamb crop.”
Making an agreement
“Both sides will have to evaluate the facilities and land available to determine what type of share arrangement will work best,” he said.
No matter what type of arrangement producers agree upon, Ollila encourages both sides to do their research and be prepared.
“Any time producers enter into those agreements, a lot of research will cost them very little,” he said.
“I also tell producers to make sure everything is in writing. There are Extension personnel very familiar with sheep and how these arrangements work who are available to help producers work out share agreements,” Ollila added.