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MMFS Manual

Chapter 9.1 Breeding helps improve profitability

Background information

In simple terms, profit is the difference between income and expenses (see Chapter 1.3 and Chapter 1.4 in MMFS Module 1 Plan for Success). Understanding what drives profit in your breeding enterprise can help you make decisions that will improve your profitability.

While there are many profit drivers in a business, those which relate most directly to breeding are efficiently meeting market specifications, reproductive performance and wool production.

The more effective sheep you can breed, the more kilograms of product you will have to sell relative to cost of production and if this product meets the market’s specifications, it will be of higher value compared to product that doesn’t.

At a glance

  • The main profit drivers related to breeding are efficiently meeting market specifications, reproductive performance and wool production.
  • Meeting market specifications and fit for farm can be measured through market compliance metrics (premiums and discounts received).
  • Reproductive performance can be measured through marking or weaning percentages and ewe mortality.
  • Wool production can be measured in wool cut per head or per hectare.

Driving profitability in your business 

In general terms, profit is the difference between income and costs. In livestock enterprises you can manage and breed your animals to improve profit and manage future risks by:

  1. increasing income; 
  2. decreasing the cost of production; or  
  3. both.  

When identifying which profit drivers to focus on, it’s important to consider how profitability is measured. 

Profitability can be measured on a per hectare or a per head basis. Whichever method is adopted, it is important that this be applied consistently over time so progress can be measured and monitored. For more in depth information about the options for understanding and measuring your sheep business, see Chapter 1.3 and Chapter 1.4 in MMFS Module 1 Plan for Success.

In higher rainfall areas with higher stocking rates, it is advisable to consider productivity and profitability on a per hectare rather than a per head basis. In lower rainfall areas, with more variable land system distribution and less reliable climatic conditions across properties, profitability per head may be a more appropriate measure. Rainfall is sometimes also factored into the equation, for example, profitability per ha per 100 mm of rainfall.

There is a distinction between reducing costs and reducing cost of production. Relentlessly driving costs down can result in corners being cut which compromises productivity, for example, not vaccinating. Strategically reducing the cost of production and increasing efficiency improves productivity and will aid profitability.

The opportunities to increase income and reduce the cost of production are called profit drivers. For example, if you can increase the number of livestock, you wean or the number that meet a high-value market specification while incurring proportionally less costs, your enterprise is likely to be more profitable.

Profit drivers will vary from enterprise to enterprise and between regions but those most relevant to breeding are: 

  1. meeting market specifications which will help ensure you realise the best price for your product in a given market; 
  2. reproductive performance; and 
  3. wool and meat production, which are both potentially major contributors to the production of kilograms of saleable product. 

Meeting market specifications can be measured through market compliance metrics (premiums and discounts received). Further information about wool can be found in MMFS Module 2 Market Focused Wool Production and meat in MMFS Module 3 Market Focused Lamb and Sheepmeat Production.

Reproductive performance can be measured through scanning, marking and weaning percentages. This is covered later in the module. 

Wool production can be measured by the amount of wool grown per hectare or per sheep, and meat production measured by the kilograms of lamb or mutton turned off per hectare.

For example, by improving reproductive performance, income can be increased as there will be more animals and therefore product to sell, whether that is wool or meat, with only modest increases in stocking rate. Improving reproductive performance may also mean that you have fewer dry ewes and more live lambs which means the cost of running dry ewes is reduced.

Similarly, increasing growth rates generally means animals can achieve market specifications or joining weights sooner and more efficiently.

Other profit drivers such as stocking rate and labour use efficiency are also important (see Chapter 1.4 and Tool 1.10 in MMFS Module 1 Plan for Success).  

Most profit drivers are linked in some way, for example, improving reproductive performance is an effective way to increase stocking rate.  

Meeting market specifications improves profit 

There may also be opportunities to better meet market specifications. This generally involves presenting a more consistent product in terms of both quantity and quality or producing this product more efficiently, such as through increased growth rates or fleece weights.

Which areas are important to your flock will be specific to you and will depend on both your current and future markets. 

Suitable markets may change for your flock or opportunities may arise to obtain premiums for products, such as those associated with eating quality, welfare and sustainability. 

Animal welfare is a good example of how markets have and are currently shifting, especially around the demand for mulesed with pain relief or unmulesed wool and sheep. Breeding is an effective way to reduce reliance on mulesing but this takes time and planning, so you need to start now if this is of interest to you or your customers.

Breeding can also help produce more efficient animals which meet market specifications sooner for weight or fibre length, for example while consuming less feed.

While it is important to anticipate market events, you don’t want to be frequently chopping and changing or chasing fads. This can adversely impact your genetic progress and profitability. Make sure your approach is consistent with your broader business objectives (see Chapter 1.1 in MMFS Module 1 Plan for Success).

Aspects of quantity can include:

  • carcase weight, lean meat yield;
  • fleece weight, staple length; and 
  • number and liveweight of surplus sheep. 

Areas of quality can include:

  • carcase fat, intramuscular fat and shear force;
  • fibre diameter, staple strength, position of break, wool colour, vegetable matter; and  
  • age, pregnancy status, type of surplus sheep. 

Improving reproductive performance improves profit 

There are many components which contribute to reproductive performance.

There are a range of areas growers can target for increased profitability through improved reproductive performance, including:

  • Lamb survival, particularly in multiple-born lambs  
  • Reducing the incidence of dystocia 
  • Improving ewe and weaner survival 
  • Improving weaning rates 
  • Joining ewe lambs 
  • Optimising number of lambs conceived 

Understanding how you are performing in these areas can help you prioritise management strategies and traits to improve your reproductive performance and profitability. Be consistent in how you measure and asses your performance to gain a true impression of how you are performing and the progress you are making.

MMFS Module 10 Wean More Lambs is focused on ewe and ram health, preparation, and nutritional optimisation for reproductive success.  

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