2 April 1999

Cut production costs to boost survival battle

Sheep producers were

invited to this years BSAS

conference. James Garner

reports what they heard

REDUCING production costs for every kg of lamb sold is essential for sheep producers looking to survive the income crisis.

ADAS sheep and beef specialist Neil Pickard told delegates at BSAS in Scarborough that lowland sheep production had declined in profitability, with many producers showing a loss when accounts included overhead as well as variable costs.

"Some, especially mixed units with arable production, may have to consider whether keeping sheep is still viable."

But on small livestock farms there may not be many alternatives, he said. Supplementing income with environmental payments and organic production would need to be looked at, however much production costs were cut.

Look at overhead cost control and calculate how much it costs to produce a kg of lamb deadweight to determine a break-even price, he said.

But he warned that typical overhead costs taken from sources such as Nix and the SAC handbook probably underestimated true values. A recent MAFF funded ADAS study revealed overhead costs on average were £50 a ewe.

He said that typically quoted figures for overhead costs were £44 a ewe, with variable costs of £36, amounting to £80 a ewe total.

"After deducting £18 a ewe for SAP and wool payment, lambs have to reach £62 a ewe to break even.

"Where ewes average 1.6 lambs a ewe, sold at 18kg deadweight this means that a break even sale price of £2.15/kg is needed. A 10% saving in costs would reduce this to £1.87/kg.

"Where break-even costs are above £2.40/kg, it is difficult to meet that target and producers should consider whether sheep are best for them."

Mr Pickard said everyone seeking a long-term future in sheep production should drive down their unit cost of production.

Consider three options, he said. "Produce extra lambs, heavier lambs or same number of lambs at lower costs."

When examining variable costs Mr Pickard suggested reducing mortalities by selling ewes a year earlier.

"Buy high energy supplements and look at cost a unit of energy when purchasing feed. Have soil analysed and use appropriate rates of nitrogen. But be wary of cutting vet and medicine bills too much because you might lose output.

"To reduce labour keep the system simple and do not have grass keep that is miles away from the farm. Where possible keep more sheep for the same labour."

Cut machinery costs by using contractors. That may be cheaper, but not necessarily more convenient, he said. But, in his experience, prompt payment often ensured contractors were available when you wanted them.

CUTTINGCOSTS

&#8226 Examine overheads.

&#8226 Simple systems.

&#8226 Lower labour costs.