A great business...if you have a solid plan
By Eadie & John Steele
June 01, 2010
The words ‘farming’ and ‘lucrative career’ aren’t paired together very often, but that’s the case right now in sheep farming.
A recent Canadian Sheep Federation ad proclaims “there’s a market for every lamb you produce” while an Alberta Lamb Producers’ video making the rounds boasts, “The sheep industry offers you all you deserve – a profitable business, a rewarding lifestyle, and the chance to prove that while sheep are small in size, they are big business.”
Obviously, there’s a bit of hype there, but it’s certainly true that some fundamentals in the sheep sector are very positive. We can’t come close to meeting domestic demand so nearly 60% of our lamb must be imported. And demand is booming, thanks to the influx of immigrants from the Middle East, south Asia, and other areas where lamb is a staple. Moreover, as these immigrants become established and more prosperous, demand for premium cuts is rapidly increasing. Finally, but critically, selling within Canada means sheep producers are unaffected by the soaring Canadian dollar (unless it opens the border to cheap imports, which is not the case at this time).
So the opportunity is real and prices are extremely strong – but if sheep producers are getting rich, we’ve yet to meet any of them. Certainly, we haven’t felt the need to shift our bank account to an off-shore tax haven.
The shrinking size of the national flock hints at the other side of the story. It numbered nearly one million animals when the BSE crisis caused the export market to virtually collapse in 2003. As of January 1st of this year, we were down to 807,000 lambs, ewes and rams.
So while it’s true that we could greatly increase production without any fear of a price crash, there are obviously other factors which need to be considered. Here are some of the main ones:
Lack of quality breeding stock: It’s not just that there’s a shortage of quality breeding stock – and there definitely is – it’s the fact that not enough producers have enrolled in quality breeding stock programs. The key to quality genetics is performance recording and, as an industry, we simply haven’t done enough of that. Too many producers are just keeping sheep and not building the extensive data base needed to create strong genetics.
We’ve been raising sheep since 1992 and working on genetics all of that time. We currently have over 1700 maternal-line ewes and 200 pure-bred Texels (known for their remarkable muscle development and leanness as well as their ability to pass on those traits) and only the top 2% of our rams are used for breeding. Measuring the performance of every ram, ewe, and lamb is an ongoing, often exhausting, and essential task. Given that it’s virtually impossible to buy large numbers of quality breeding stock, anyone who wants to succeed in the sheep business needs to make a long-term commitment to flock improvement.
Costs must be strictly controlled: If you can get quality breeding ewes, expect to pay at least $250 per animal. But capital costs will likely push the true cost to over $500 and since you’ll need at least 1,000 ewes to generate a full-time income, you’re looking at an initial capital outlay of $500,000 or more.
Part of the sheep industry’s expansion pitch is that producers in other livestock sectors can use their facilities to diversify or move entirely into sheep. Be careful here. Our experience is that sheep simply can’t support much in the way of capital costs. We keep our sheep, save for young lambs, on pasture for nine months of the year. Much of our land is rented and we practise intensive rotational grazing to keep feed costs as low as possible.
In winter, we keep some of our sheep in unheated greenhouse structures, but in the future will be keeping the majority of the flock outside all winter. Our lambs are finished in an old bank barn in which we have replaced the floor with slats for easy manure removal.
And remember all of that performance data that you collected? Well, you need to correlate those figures with your financial records to develop Key Performance Indicators. Sometimes we have to force ourselves to do it, but it is critical to our business to know our field cost per animal, cost per lamb marketed, and how many lambs were marketed per ewe. Your willingness to generate and use these sorts of financial ratios will ultimately determine how much money goes into your pockets.
Help is not close at hand: It’s hard to know where to start here. Skilled labour is almost impossible to find, and it’s difficult to hold onto people you have trained. Finding knowledgeable vets and nutritionists is nearly as tough, and many of the vaccines and wormers that are widely available in the rest of the world haven’t been approved for use in Canada.
Cost of production and benchmarking data simply isn’t available, although efforts are being made in this regard. Similarly, marketing knowledge is hard to come by and the industry hasn’t yet put in place the type of market development programs you see in other meat sectors.
The one thing you will find is lots of predators. This has become a limiting factor to further flock expansion in some parts of the country; and something you need to become expert in before you enter the business. You will need an effective deadstock disposal system, well-trained guard dogs, and proper electric fencing. Once coyotes in your area gain a taste for sheep, your predator problem will spiral upwards.
So, there you have it – and it’s quite a contrast to the warm and fuzzy appeal of promotional material, isn’t it?
Well, we don’t want to go too far the other way. The future of the Canadian sheep industry truly is, as one of the farmers in the Alberta video says, “incredibly bright.”
When we started out, people were amazed when we said we wanted to have a 1,000-ewe flock. We’re nearly double that now and our goal is to reach 3,000 ewes as quickly as we can.
If you’ve been intrigued by the promotions, by all means, consider the real opportunity out there. But go in with your eyes wide open. You’ll need to get creative with your marketing and overcome the challenges presented by limited availability of good breeding stock, effective pharmaceutical tools, and skilled labour and support services. Most important of all, you will need to spend a lot of time in research mode, before and after you enter the industry.
And don’t think you can make a full-time income on a few sheep. Even at today’s high prices, it will be a challenge to earn a profit of $40 per lamb – so it’s not hard to see why you’ll need to achieve high production levels as soon as possible.
But don’t think we’re trying to discourage new entrants. Our industry needs to grow in order to sustain a profitable processing sector and build our market. We’d love to have you join us in the sheep business.
The opportunity is there and we believe it will be seized. But success will go to those who take a good look before they take the big leap.
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“High demand. Strong prices. Great market opportunities. These are just three things the sheep industry has that other livestock sectors would desire.”
Canadian Sheep Federation,
2008/2009 annual review
Sheep inventory on Jan.1
2004: 994,200 head
2010: 806,600 head
Increase in per-capita lamb consumption
in Canada from 1997 to 2008: 67%
Average lamb prices
(dollars per hundredweight)
2000: $133
2004 (post BSE): $106
2009: $169
Sources: Statistics Canada and the Canadian Sheep Federation. The federation’s website, cansheep.ca, has a downloadable intro to sheep production and marketing.
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