Susan Schoenian, Sheep & Goat Specialist, University of Maryland Small Ruminant Extension Program
(Previously published on the Maryland Small Ruminant Page)
The following is a short excerpt from Susan Schoenian’s article titled “Economics of Raising Sheep and Goats.” Here, Susan breaks down the basics of a small ruminant enterprise budget. Along with this text, Susan has also provided links to sample budgets at the end of this article that were created at the University of Maryland that focus sheep and goat seedstock (purebred and show wether) production, raising feeder lambs and kids, as well as wool sheep enterprises. Even if you are already a part of one of these businesses, it never hurts to pencil your own operating budget out.
An enterprise budget lists the income and expenses and expected profit (or loss) for a specific agricultural enterprise. It represents one year’s worth of production and expresses profit on a per unit basis. In the case of sheep and goats, profit is expressed per female (ewe or doe).
There are two types of costs associated with producing an agricultural product: variable costs and fixed costs. Variable costs vary according to the size of the enterprise, whereas fixed costs (overhead) occur regardless of the level of output. Examples of variable costs include feed, medicine, bedding, paid labor, buck replacement and supplies. Fixed costs include depreciation, insurance, repairs, taxes, interest, and land charge and can be difficult to allocate to among multiple enterprises on a farm.
It is difficult for many agricultural enterprises, including sheep and goats, to show a profit when fixed costs are factored into the budget. In addition, most sheep and goat producers are part-time and utilize existing resources, and do not charge land and labor to the goat enterprise. Profit is usually expressed in three ways: 1) income above variable costs; 2) income above fixed costs; and 3) profit plus a margin (return to management). In the long term, fixed costs must be covered, unless off-farm income is used to finance the farming operation.
It is also useful to calculate a breakeven price. This can be determined by dividing the total output (pounds of live animal sold) by total production costs. Producers can use the breakeven price to determine prices for onfarm sales, by adding a margin of profit to the breakeven price.
It is important to note that an enterprise budget is a planning tool and is only as good as the information that is entered into it. The best source of information for enterprise budgets is a producer’s actual production and marketing data.
Sample Enterprise Budgets:
- Feeder lamb and kid budget
- 2016 Goat Seedstock
- 2016 Sheep Seedstock
- 2016 Detailed Wool Sheep Enterprise Budget (allows for individual fleece sales)
- 2016 Detailed Sheep Seedstock Enterprise Budget (allows sales of breeding stock and show wethers)
- 2017 Detailed Sheep Enterprise Budget
- 2017 Detailed Meat Goat Enterprise Budget
- Detailed Maryland Meat Goat Seedstock Enterprise Budget (allows sales of breeding stock and show wethers)