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:
- increasing income;
- decreasing the cost of production; or
- 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:
- meeting market specifications which will help ensure you realise the best price for your product in a given market;
- reproductive performance; and
- 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.
SIGNPOSTS
A series of webinars that provide timely information about emerging research outputs and topical technical information to aid on-farm decision making for your sheep business.
A ten-part video series centred around sheep reproduction. Tune in to hear a range of practical ways growers can influence sheep reproduction with the latest research and tools informed by the AWI-funded research and development outcomes.
Episode 1 - Lambing mob size
Episode 2 – Weaning to manage
Episode 3 – Ram performance management
Episode 4 – Ewe condition scoring
Episode 5 – Joining timing and length
Episode 6 - Lambing paddock planning
Episode 7 - Scanning to Manage
A producer case study outlining the benefit of calculating your cost of production to improve your understanding of where to focus spending for the best return.
Hitting a range of key production and financial benchmarks can more than double prime lamb profits. Knowing what these benchmarks are, the targets for each and the management strategies to achieve them is fundamental to strong, long-term profitability.
An overview of the financial performance of wool flocks and how it compares to other competing land use activities, findings of a deeper analysis of the performance of eight top performing wool flocks over five years, and key financial and production benchmarks suitable for setting wool business strategy in a range of regions.
Learn why knowing your cost of production can help you make improvements in your business and how other producers have benefited.
Tips and advice for using analysing and interpreting the results from the calculator to identify the changes you may need to improve your profitability and which aspects of your business are running well or need tweaks.
A selection of webinars aimed to cover the key practices to improve business and sheep performance.
Various webinars on animal health, pasture and cashflows to drive productivity in your business.
A ‘how to’ video explaining the whole farm KPI calculator and key financial data required to give you an overview of your business performance to identify areas of success and areas of improvement to help you make fact-based decisions.
The interactions between pasture growth patterns, stocking rate, time of lambing and production are complex. The guidelines outlined in these handbooks give wool producers an optimum strategy for managing ewes ‘year in, year out’ to maximise production, ensure healthy ewes and deliver efficient feed allocation.
A series of guidelines and recommendations for managing ewe flocks throughout the year.
A tool to help you determine your cost of production for sheep, beef and goats, and compare performance annually.
For sheep producers wanting to improve the performance of their enterprises, a good understanding of the current operating efficiency of the business is essential. Cost of production is a key factor affecting the profitability of sheep enterprises and calculating your cost of production is one of the important steps in assessing flock performance and a first step to making improvements.
The whole farm key performance indicator (KPI) calculator uses key financial data to give you an overview of how well your business is performing. The benefit of analysing your business in this way is to identify areas of success and areas of improvement to help you make fact-based decisions.
A national program for young people in all facets of the wool industry which develops their leadership and professional skills.
Designed for woolgrowers and is aimed at improving weaner management of their Merino flock, targeting 95% weaner survival to one year of age. WWW identifies key practical actions and tools for commercial enterprises to implement on farm to achieve this performance aim.
Hands-on workshop focused on improving ram performance and working longevity in commercial sheep enterprises. The workshop is designed increase the skill of producers across the key components of ram performance and impacts on overall breeding enterprise performance, including anatomy, physiology, spermatogenesis, metabolic demands, health, disease & biosecurity and the financial impact of the ram team.
Assists the commercial self-replacing Merino production sector in recognising and placing importance on the total lifetime productivity potential and value of their Merino ewes (fleece, meat and surplus stock) and identifying ‘passengers vs. performers’.
A practical, one-day workshop highlighting the key production benefits of superior genetics, plus feed management for improved reproductive performance and livestock productivity.
A one-day workshop to increase skills and awareness in breeding for flystrike resistance.
The course is delivered in small groups of 5-7 sheep producers that meet six times per year with a professional trainer. During these hands-on sessions, the group visits each participating farm and learns skills in condition scoring, pasture assessment and best practice ewe and lamb management to increase reproduction efficiency and wool production, mainly through reducing ewe and lamb mortality.
A two-day financial and business management training workshop for all livestock producers. The aim is to enhance producer knowledge and skills in basic financial and business management to improve business efficiency and profitability.
This program is delivered as a mix of workshops and on-farm coaching to assist you in building your own plan to improve lamb survival within your business. The first step is knowing where you have come from, knowing your potential, and identifying your opportunities for improvement.
