PicoBlog

Another year has gone by and it’s once again time for my annual cost of production post. However, when I sat down to do these numbers, a problem quickly became apparent. 2023 was a very different year for our flock. We made some massive changes which I will expand on the details of later this year. We completely cut out one lambing for personal reasons that overlapped with the changes.

Subsequently, when I went to calculate the cost of production per lamb, the number was significantly higher than in the previous years. This didn’t accurately reflect the overall financial situation though because our costs decreased in several areas. We just produced fewer lambs meaning the same total costs were being spread over fewer lambs.

I then went digging into the other production variables for our farm and other trackable numbers. I ended up looking at the productive ewes. I briefly looked at this method in 2022.

Productive ewe = a ewe who produced at least one live lamb between January 1 and December 31

This number has been consistent for our farm, averaging 225 ewes over the last three years. I specifically picked using productive ewe numbers over total or average ewe numbers due to some issues we’re working on resolving (I promise, I will expand on this in another post). We often have an additional 40-80 replacement ewe lambs on hand. At the end of the day, the ewes producing the lambs are the ones carrying the entire flock and paying the bills.

In addition to having roughly 225 ewes produce at least one lamb per year, we’ve been using approximately the same amount of hay and tonnes of grain over each of those three years (2021-2023) as well. The number of lambs per ewe per lambing has also remained consistent, just the number of lambings declined. In previous years, we lambed at least 60% of ewes twice. In 2023, however, less than 20% of the flock lambed twice.

We have a confined operation that feeds mainly forages and barley. Most of the hay is produced on-farm and the remainder we purchase through a cost-sharing agreement. Our sheep are indoors all year. We have been adding some grazing but this is a work-in-progress and not significant in any way. Our sheep are commercial shedding ewes that are a mix of Katahdins, Dorpers and Romanov. Less than a dozen of our ewes require shearing so we do not have a wool cost or revenue. We do some accelerated lambing groups and mostly lamb in the cooler months of the year. Since we produce lambs in Quebec, we have to follow the marketing restrictions, so we sell light lambs (under 80 lbs) through live auctions in Ontario.

If you go back and read the prior year’s posts, you will find some small changes in the comparatives. I did go back and update my costs for every year to ensure that I’m comparing them in the same way. I calculated these numbers by taking the financial statements and adjusting for inventory and prepaid expenses. These are cash values; depreciation, labour and taxes were not factored in. I have also removed all costs associated with the changes made in 2023 that affect the flock, and not the raising of actual lambs.

I then went through my entire list of lambs born this year and counted each ewe to give me the productive ewe numbers. The adjusted costs were then divided by the number of ewes. All costs are expressed in dollars per productive ewe unless otherwise noted.

I changed the groups of costs from prior years. In the past, I have used fixed and variable costs. This year I have broken it down into interest costs, infrastructure costs and production costs. You can find the prior year's cost of production posts based on lambs for 2022 and 2021 in the archives.

Production costs in 2023 came to $265.60 per ewe. They were $307.21 in 2022. Included in the production costs are the following:

• Feed purchases including grain, minerals, supplements, etc.

• Costs associated with hay production including fertilizer, twine, net wrap, fuel and repairs

• Veterinary costs for medication and breeding protocols

• Breeding ram purchases

• Custom work such as manure spreading

• Selling costs including tags, transportation and commission

These costs are directly related to owning and raising sheep. As mentioned, we do not need to shear so there is no cost for shearing. I have not included the guardian and herding dogs in this section as the cost is small and I’d probably own them regardless. There is no cost for deworming in the veterinary costs, we did not need to deworm any sheep. Another cost other flocks might have is ultrasound scanning, we do this ourselves.

The largest expense is feed. Feed costs decreased to $187.57 per ewe from $219.67 in 2022. The breakdown is as follows with the 2022 comparative in brackets.

• Grain purchases $38.69 ($43.65)

• Creep, pellets and supplements $34.07 ($18.43)

• Mineral and salt $3.17 ($3.06)

• Purchased hay $31.59 ($51.08)

• Homegrown hay $80.06 ($103.45)

The biggest change was in grain and prepared feed purchases. In 2022, we tried to mostly feed whole grains and minerals. In 2023, we went back to buying prepared pelleted supplements and we also had to custom order medicated feed for the lambs. We did manage to expand our on-farm storage so now we can get better prices going forward.

We had a large stockpile of homegrown hay from 2022 and didn’t need to buy as much hay as a result. We use about 570 round bales per year. The per acre cost of growing our hay did decrease to $287.53 per acre from $358.23. However, we did not apply fertilizer in 2023, only manure. We were only able to get two cuts of hay compared to three in prior years due to weather conditions. We will be applying fertilizer again in 2024.

Marketing is a significant expense, for us, this is sales barn commissions, tags and trucking. We do not own a trailer so we hire a truck to come and take our lambs to the sales barn. A fair bit of planning takes place so we can fill at least half the trailer with each shipment. This cost $18.96 per head sold in 2023 (it was $17.52 in 2022). However, in total, it cost $40.25 per ewe, an increase from $32.57 the previous year. We sold a lot more sheep last year than we ever have before so this increase was expected.

Veterinary and breeding costs ended up being $24.13 per ewe compared to $30.73 in 2022. The costs of medication didn’t change, it was still $10 per ewe. The major change was in ram purchases, we didn’t buy as many rams in 2023.

The last major category was bedding. This cost $13.64 in 2023 ($24.24 in 2022). We didn’t need as much straw because there was more waste from some of the hay. We usually use around 75 big squares per year but we only needed 58 bales in 2023.

These costs included utilities, property taxes, insurance, vehicle costs and other general expenses such as the guardian dogs and UPA membership. Interest costs, which include loan interest, and bank charges, worked out to $47.96 per ewe. It was $53 per ewe the prior two years. We do not have an operating loan and our mortgage rate is still fixed so there weren’t many changes.

Overall, the costs to run the barn decreased noticeably. In 2022, it cost $47.41 per ewe while in 2023 it was $33.69. This number includes interest on the barn loan, repairs and maintenance as well as utilities. Utilities declined as did general repairs, apparently, we didn’t break as many water lines.

Property costs ($46.36) did not change much, insurance increased as it does every year but property taxes were the same. This number does include mortgage interest. Insurance for the farm is by far the greatest cost, it’s about the same as mortgage interest now. We have extremely limited options for farm insurance providers which is frustrating.

Vehicle and other costs combined came to $54.81 per ewe. In 2022 these costs were $41.41. All of the increase can be attributed to significant repairs done on the farm truck.

Overall, the interest and infrastructure costs came to $135 per ewe, while they were $138 per ewe in 2022. These costs are essentially fixed, there are not many changes to them year-over-year. The best way to decrease them is going to be to have more productive ewes.

All in all, the total cost per productive ewe was $400.46. It was $445.40 in 2022 and $416.49 in 2021. This isn’t a great number, as we sell an average of 1.44 lambs per year per ewe. Lamb prices declined, the average price per lamb sold was $161.51 which is a steep drop from the $192.06 we got in 2022. We sold more lambs than we’ve ever sold before.

Despite making every effort to reduce costs where possible, the only reasons we were able to break even in 2023 were due to the farm income stabilization program and sales of cull ewes. Not all provinces have such a program, although Ontario has the Risk Management Program. Our main objectives with the changes we made are to increase the number of lambs sold per ewe to grow revenue and improve feed efficiency to lower costs.

Overall, 2023 was a rough year for the farm and us. We’re still here though and the ewes are still lambing so we’ll give it another go in 2024. The next post will be about the changes we made, the costs associated and how that’s all going.

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