Utilizing Cost of Production Data for Sheep Producers

There is a saying that “you can’t manage what you can’t measure.” For any ranching operation keeping accurate records increases the chance for success.  Both production and financial records can provide key insights to a producer’s management strategies and guide decisions moving forward. 

Keeping individual ranch records over time also allows a producer to see ranch trends.  Knowing how production is trending on a ranch as well as expenses can be very powerful tools to helping manage a ranch. 

Another instructive tool can be utilizing benchmarking as a checkpoint for ranch expenses.  Recently I was part of a team that developed a U.S. Baseline Cost of Production Model for sheep producers.

My interest in collecting the data and developing the baseline cost of production model was to allow sheep producers to utilize a benchmarking approach.  The power in the aggregate numbers collected in this project is that sheep producers now have a checkpoint capability.  After examining your own cost of production information as a sheep producer you can now look at the U.S. Baseline model and see if there are any stark differences.   

An individual ranch may be much higher or lower than the baseline numbers for any given category.  This in and of itself is not good or bad – or even all that helpful to a ranch manager.  However, for a producer understanding why their operation is significantly higher or lower in a certain category can be very valuable. 

As an example, a producer may look at their expenses for rams and see that they are significantly above the baseline model.  At face value, this would suggest that the producer should consider reducing the amount spent on new rams. 

However, if that producer looks at the weaning percentage and weaning weight of their lambs and finds those numbers to be above the baseline model numbers, the increased ram expense may be justified.  By utilizing this data for other similar analysis producers may be able to identify areas of needed improvement on their ranch.

The U.S. Baseline Cost of Production Model was developed by a Livestock Marketing Information Center (LMIC) working group consisting of myself, Tim Petry with North Dakota State University, David Anderson of Texas A&M University, Lee Meyer with University of Kentucky, Kenneth Andries at Kentucky State University and Jessica Sampson with LMIC. 

Budgets were developed and standardized for four different regions throughout the U.S. and then collated to form the U.S. Baseline Model.  I collected the data for the Wyoming region, which consists of Washington, Oregon, California, Idaho, Nevada, Montana, Utah, Arizona, Wyoming and Colorado. The Wyoming region budget is intended to represent a western range sheep operation. 

A full version of the report and budget can be found on the American Sheep Industry Association website at sheepusa.org under “Research and Education” or on the LMIC website at lmic.info under “Members Lists and Reports.”