Making More from Sheep Australian Wool Innovation Limited Meat & Livestock Australia
MODULE 1: Plan for Success
Procedure 1.2
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Background
information

In the grazing industries, knowing your cost of production ($ per kg of meat or wool) is one of the most important pieces of financial information you can use to assess your business performance. Comparing your performance against other businesses (procedure 1.3 of this module)  is more meaningful if you know your costs per kg. Making sense of prices and marketing (see procedure 2.3 in Market Focused Wool Production, and procedure 3.1 in Market Focused Lamb and Sheepmeat Production) is also much easier.

Simply comparing your cost of production with your average sale price will give you a quick check of your business health, and show the likelihood of the difference between the two being sufficient to meet your overhead costs, interest expenses and taxation liabilities.

At a Glance
pt Calculate your cost of production to give a better picture of the financial health of your business
pt Knowing your cost of production enables you to rate your annual performance and compare against industry standards
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Key decisions, critical actions and benchmarks

Determine your cost of production

Because calculating cost of production is such an important step in analysing business performance, a specific set of tools is included with this module to make the job as easy as possible.

These include:

  • Tool 1.6 – the MLA-developed cost of production calculator for lamb enterprises
  • Tool 1.7 – the AWI-developed cost of production calculator for wool enterprises can help you work out your wool production costs to help determine the right time and price to market your wool. It is critical to know what it costs to produce a kilo of wool so you can decide when and how to sell your clip. You can also use the Elders Wool Cost of Production Calculator (see signposts).
  • Tool 1.8 – the MLA-developed cost of production calculator for beef enterprises (included in this module because it will allow sheep producers who also run some cattle to see how that enterprise is going).
  • Tool 1.13 - Making More From Sheep cost of production calculator for sheep enterprises. This calculator is intended to be used for only one enterprise at a time, for example a specialist prime lamb flock. If you have a Merino wool flock and you join a percentage of the ewes to a terminal sire and the rest to Merino sires, break that flock into two enterprises:
  1. A dual purpose lamb flock that includes the ewes joined to a terminal sire
  2. A wool flock that includes those ewes joined to Merino sires, and all Merino wethers.

Note – printed copies of the MLA and AWI calculators are included in the tools section but they are more suited to electronic use. 

Signposts Signposts

Attend

The MLA EDGEnetwork® program is coordinated nationally and has a range of workshops to assist sheep producers. Contact can be made via:

 

View

MLA, AWI, Making More From Sheep and Elders websites to download the cost of production calculators

 

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