Economic tools: Financial tools for farm flock economics shared in ASI webinar
On Oct. 12, the American Sheep Industry Association (ASI) hosted Bridger Feuz, the interim associate director of University of Wyoming (UW) Extension and former UW Extension livestock marketing specialist, to address questions and barriers farm flock operators may face.
Feuz discusses tools and resources to help inform decisions and evaluate potential strategies for farm flock producers.
Important focus in cost of production
While most questions producers ask are focused on management and production, Feuz shares operators should also think about the opportunities they have to take advantage of the cull market, different marketing and sire options and even pasture improvements. He notes, coming up with questions regarding improvement may be challenging, but the common denominator in answering most production questions is the cost of production.
“A few weeks ago, we ordered some cinnamon rolls from a family friend, and I asked how much she made from each plate of rolls,” Feuz says. “Her answer was, she had no idea. She knew what price she was charging, but she didn’t know how much profit she made.”
He continues, “I ask similar questions to producers in workshops. The challenge of production is knowing the cost of production, and the way we do this is keeping records.”
Recordkeeping
Feuz explains cost of production studies present average data from across several farms. However, in his experience, the odds of having a farm similar to the average utilized in research is very small.
“Science presents average numbers, but the variation between farms and ranches – even of similar size and in close locality – can be great,” he adds.
Feuz recommends producers maintain their own records for data. In addition, he notes utilizing data from the same operation will greatly help to inform decisions.
“Use the method of recordkeeping you are comfortable with and you will use on a consistent basis,” he says, noting most producers are more interested in creating genetics, managing breeding and animal husbandry, but recordkeeping is important. “I’ve talked a lot about recordkeeping over the years, and there is no shortcut. This is not the part of raising sheep we enjoy; we just have to buckle down and do it.”
Cost of production does not give the final answer to the success of the farm, Feuz explains, but rather, the analysis on a unit cost level is needed in most decisions.
Tools for operation changes
Fuez shares in terms of decision-making tools available for producers, the UW Ranch Tools website offers several resources, including partial budget, net present value, breakeven, ewe evaluation and more.
For producers looking to move to a terminally focused ram, Feuz notes many ask if this change will improve their bottom line. The partial budget tool is a simple financial analysis to help producers understand the numbers regarding this decision.
In addition, Feuz says the partial budget tool would be helpful in determining if interseeding pastures with legumes would be beneficial for producers.
“Certainly, there are benefits in terms of feed quality by adding legumes, as typically they have higher protein content,” he says. “The idea of interseeding decreases fertilizer costs by introducing nitrogen-fixing plants.”
Tools for marketing and production
The breakeven tool is a great way for producers to look at market timing, according to Feuz. In addition, an ewe evaluation tool is available.
In an example, Feuz shares he knows of a few producers who buy older, short-term ewes and sell all replacement ewe lambs as replacements or as lambs on the commodity market.
“One can watch the Northern Livestock Auction and look at prices of old, short-term ewes, run them for a couple years in a farm flock situation and make a decent margin,” he says.
The ewe evaluation tool is a great option for producers looking for a tool to place value on the productivity of both old, short-time ewes and young replacement ewes. The website also offers a genetic investment calculator for estimating how much a lamb crop should bring, a stocking rate tool for pasture utilization and a market comparison tool, which might be helpful for those selling online or through video.
In addition, Feuz explains a new ewe marketing tool will soon hit the Extension website.
“A lot of times, there is more flexibility with cull ewes than a range-type flock scenario, and farm flock producers might even have flexibility to purchase ewes coming off range flocks,” he says. “One of the things that is really interesting is there is an extremely consistent market timing signal in the cull ewe market and at times – this year is one of those times – heavier ewes are rewarded in the market.”
Feuz continues, “By putting weight onto animals, price per pound typically goes down. But in this case, adding body condition translates into more pounds and the animal is worth more per pound.”
In this example, Feuz adds cull ewe prices tend to be lower in October than they are in February, based on the Colorado cull ewe market information sourced from the Livestock Marketing Information Center.
“It might be more advantageous for producers to hold cull ewes over the winter. It doesn’t take much feed to get fairly substantial compensatory gains on cull ewes, he says, noting the new ewe market evaluation tool would help producers weight these types of decisions.
Feuz recommends producers check out available tools, and reach out to a local Extension agent to fully utilize resources to their full potential.
Averi Hales is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.
