Chapter 9.2 Profitable sheep are fit for purpose
Background information
Breeding and management to ensure the expression of desirable genetics drives profitability in a breeding enterprise. What defines desirable genetics will depend upon your environment (or farm) and the markets you are supplying. The challenge is to breed an animal that fits both your environment and your markets. Such animals can be considered fit for purpose and are likely to improve your profitability.
At a glance
- You can drive profit by ensuring the sheep you are breeding are both fit for market and fit for farm, and therefore fit for your purpose.
- Fit for farm means the animal you are managing is suited to your environment. This includes the physical environment as well as how you manage them.
- Fit for market means the animal is able to regularly produce the desired product given your environmental conditions and management approach.
Fit for purpose
It is important to ensure that the livestock you produce are fit for purpose, or more specifically fit for both the farm and fit for the market.
This means livestock perform well in your operating environment, under your management and produce what the market wants. This should be consistent with your overall business objectives (see Chapter 1.1 in MMFS Module 1 Plan for Success.
Matching the right kind of animals to the environment and to the style of management will go a long way to optimising the production of kilograms of high-quality saleable product per hectare and, in turn, generating profitability.
You should avoid trying to fit a square peg in a round hole, for example, producing a highly specific product in a marginal and unreliable environment with limited capabilities and resources.
You understand your property and your market best, so have confidence in your understanding and call on this in your decision making. Generic gross margins or the like should always be appraised in the context of your operating environment and local knowledge.
When you work out what fit for purpose means for you, you can generate profit by optimising the use of breeding and management in response to the profit drivers. You will be better able to manage your enterprise to optimise profit and you may even identify other business models, structures or markets that may be better suited to your circumstances.
What makes sheep fit for farm?
Fit for farm requires an understanding of the operating environment (MMFS Module 5 Protect Your Farm’s Natural Assets and MMFS Module 8 Turn Pasture into Product) as well as the business structure (see MMFS Module 1 Plan for Success and MMFS Module 4 Capable and Confident People) to ensure the animals are well suited.
Ask yourself a range of questions when determining whether particular livestock are a good fit for your farm:
- Can they handle the climate? Do they need to be robust and able to walk long distances or up and down hills to access feed and water?
- Do they have any obvious or unusual health and welfare concerns? Can they be managed productively and efficiently?
- Do they need to cope with certain conditions, such as parasite burdens?
- Is your environment prone to large volumes of dust or vegetable matter?
- Are there inherent characteristics of the pastures, climate or infrastructure which will influence enterprise selection?
- Does the farm have a shearing shed?
- What micron wool is best suited to the region?
- What’s more, are they suited to your mindset and capabilities?
You should also consider whether the fit can be influenced by management. For example, if your farm is prone to grass seed, is this something you can manage through paddock selection or pasture and livestock management or does this limit the kind of livestock which fit your farm?
On an enterprise level, some farms or areas of farms may be better suited to wool, wethers or store lamb production rather than finishing.
You should also consider your broader business operation:
- How does the enterprise fit in with other activities?
- Are there complementary opportunities such as may exist in a mixed farming operation, for example, or does a first cross operation complement your wool production enterprise or will it compete for scarce resources?
- Are areas of the farm cut off for extended periods, e.g. floods?
- What is access to essential labour (such as shearers) like at your farm?
- Can this be relied upon when you need it? Does the enterprise impact risk management or offer increased flexibility and the opportunity to leverage other enterprises?
- What are the risks and consequences involved in not meeting specifications in some years?
If your farm is a good fit for a particular enterprise but you lack the experience or dedication within the business to conduct that enterprise successfully, bringing in technical expertise may be an option.
Don’t force yourself to engage in an activity that you would really prefer not to be doing. People tend to do better at what they like doing, so try to focus on your interests as this will be a better fit than an enterprise that does not engage you. While an alternative enterprise may potentially be more profitable on paper, if you really don’t want to do it, chances are you will not do it well and this may mean it’s not a good fit at the end of the day. For example, if Merino sheep are your thing, cattle production may not be the right option for you.
What makes sheep fit for market?
The livestock you are managing need to be both fit for your farm and your market. Think about both the market you are aiming to meet now as well as what they will be paying for into the future. How far away that might be, e.g., within 5 years or 10 years? Do you need to start making changes to the type of animal you are producing now to meet present or future requirements? For example, how does the type of lamb you are producing now perform against emerging cut size and eating quality specifications? What about fibre diameter demands, animal welfare requirements, availability of future parasite control chemicals, and future methane and carbon market requirements?
A few future-proofing questions you should ask yourself include:
- What do you think the markets will do in the future, and when?
- Who will be leading the change? Other producers (restocker market), product consumers, customers along the supply chain, brands or retailers, domestic or international governments?
- Where will you put emphasis to continue improving management efficiency in your production system? What opportunities exist to reduce wastage and improve outputs?
- What is still going to be relevant and what will become obsolete?
- Can you identify changing consumer preferences or requirements?
- Are there market forces which may cause legislation to change and will this affect the suitability of your livestock for a particular market?
- Are there market access requirements which may affect the suitability of your livestock for particular markets? For example, quality assurance schemes, or carbon or emission requirements?
- How much demand is there for your livestock and is this likely to change?
- Do you have the scale to efficiently service existing contracts, or access larger contracts and direct marketing opportunities?
- Do you wish to join a product quality assurance scheme? What are the pros and cons of doing so?
- Do you have the size or capability to supply particular markets and is value adding an option? For example, selling scanned-in-lamb ewes?
Think also about market proximity. Your livestock may fit the farm and theoretically fit a market but that market fit also needs to consider the practicality of delivery. If you can’t deliver them to market as required by that market, that may be an issue. Once the market that best fits your enterprise and vice versa has been identified, optimising the number of animals that meet this target market becomes your goal.
Your agent, wool broker, trusted advisor, industry commentators and other growers can help you understand possible future markets. Organisations such as Australian Wool Innovation (AWI), Australian Wool Exchange (AWEX) and Meat & Livestock Australia (MLA) are also a source of market information. 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.
SIGNPOSTS
Check out this overview of the services and tools available at myFeedback – an Australian-first information hub for sheep and beef producers, combining data from NLIS, MSA, NLRS, and AHA.
Statistics and updates on activities in major international markets for lamb.
This hub has been created to help build the capacity of sheep producers and advisors to assess and rank limitations to carcase performance and then develop management approaches to address non-compliance issues on-farm.
A broad review of the global market for wool and competitor fibres, including wool production forecasting, retail and trade market reports, consumer insights and trend monitoring, and fibre market research.
Latest pricing, reporting, forecasts and analysis for Australian and international red-meat markets.
An industry-first single-source data program, which combines the benefits of carcase and eating quality data with animal disease and defect insights in one place, enabling more accurate benchmarking of carcase performance for all users and help producers make data-driven on-farm decisions to improve the quality and health of their livestock, in line with market requirements.
Australian Wool Exchange (AWEX) provides a range of industry market reports based on daily, weekly, monthly, and annual cycle, providing relevant, timely and accurate pictures of the wool market both instantaneously and historically.
A template to map out your annual operations and assist in planning and managing your enterprise.
