Observations on the economics of meat goat production

OPhotos by Rick Machen bservatiOns on the economics of meat goat production

By: Dr. Frank Pinkerton, akathegoatman@icloud.com; 512.392.4123; San Marcos, TX and Brian Payne, savannahassociation@yahoo.com; 403.894.5490; Macloud, AB, Canada

Current levels of slaughter goat production have declined 2-3% per year since 2008, to the point that we now supply only about 50% of our market needs. The U.S. deficit is filled by imported goat meat, and Canada imports about 70%. We are voluntarily vacating our domestic markets—not losing them to foreign competition.

In recent research at Louisiana State University, we found that the greatest obstacle to increasing goat numbers to meet burgeoning consumer demand for goat meat was the relatively poor returns to a producer’s labor, management and capital. Put differently, typical goat production enterprises are small in numbers and many, if not most, are marginally profitable at best. Understanding the basic factors that affect profitability of meat goat enterprises helps producers better understand the economics of their herd management allowing producers to take actions to improve net profit.

There are a number of traditional ways to undertake partial or complete business enterprise analyses, but, for goat producers, we have found that calculations to determine the break-even price/lb (BEP) of slaughter kids provide valuable information about both production parameters and economic returns. Obviously, the difference between the BEP/lb and the selling price/lb is the margin of profit/lb. In the aggregate, these margins per doe constitute enterprise profitability. Three crucial figures are needed to calculate BEP.

First, calculate the percent kid crop weaned (not just born). To do this, divide the total number of kids weaned (both sexes) by the number of does exposed (not the number of does actually kidding). If 100 does were exposed and together weaned 150 kids, the kid crop weaned would be 150%. In the real world, nearly all of the does would cycle and most would conceive and perhaps 90+ would kid and produce “X” number of kids, “Y” of whom would survive until weaning or sale time.

Co-author Payne cautions that many producers may prefer to ignore does exposed but not conceiving/ kidding. For example, if 100 does are exposed but only 90 conceived and delivered 150 kids, the kidding percentage would be calculated as 167% (150/90 x 100) rather than the more accurate figure of 150% (150/100 x 100). Only the latter figure is useful for BEP calculations.

Secondly, determine the average cost/exposed doe of “maintaining” her for one year. Costs must be allinclusive (feed, creep-feed, health costs, breeding fees, “overhead”, depreciation of assets, land use fee, etc.) Each doe may be viewed as a profit center because does generate all the income and bear all the costs.

Thirdly, to accurately determine BEP/lb of kids sold at weaning time (or thereafter), we must know their selling weights (in actual practice, their ‘shrunk’ weights after hauling to market).

Calculation of break-even prices/lb of slaughter goats

Dr. Rick Machen, TAMU-Uvalde extension livestock specialist, first published the chart on page 21 in 2002. It has been updated to reflect current annual doe maintenance costs that have since trended upward in concert with the general economy; they may well go yet higher. Meat goat prices have also trended upward, reaching record highs in 2014 and 2015, to date. New Holland, PA prices for # 1 65 lb kids ranged around $4.00/ lb at late August ‘15.

As you see, the chart is arranged to show ten levels of annual doe maintenance cost, six levels of percent kid crop weaned, and three selling weights. It is structured to show the interrelated influences of these factors on BEP/lb. To illustrate usage of this table, first select a weaning rate of 150% (1.5 kids/doe/ year), then select an average selling weight of 65 lb; then select a doe maintenance cost of $90/annum (remember to include an estimated marketing charge of $10/head for hauling and commission). Thereafter, follow the 150% kid crop weaned column downward to the 65 lb (shrunk) selling weight section. Then, look to the left-most column to locate the doe-cost line for $90. The intersection of this line and column shows $0.92.

This is the break-even price/lb (BEP). If you sold kids at this price/lb you would neither lose nor make money on the doe. If you sold for a higher price/lb than $0.92, for example, $2.52, you would make a profit of $1.60/lb (2.52 - .92) or $104/kid ($1.60 x 65 lb).

If this doe had sold only one kid, her profit would have been only $74.10 ($2.52 selling price/lb - 1.38 BEP = $1.14 x 65lb). The difference in profit between one kid sold and 1.5 kids sold is $29.90 ($104.00 – $74.10). If this doe had sold twins, her profit would have been $118.95 ($2.52 - $.69 BEP = $1.83 x 65 lb). The difference between selling a single and selling twins is $44.85 ($118.95 – $74.10). This beneficial effect of increasing percent kid crop born is obvious when one follows the decline in BEP as the percent kid crop born rises, no matter the weight of kids sold. The higher the percentage of kid crop sold, the higher the net income.

Payne reminds us that the number of kids (litter weight) going to sale/doe herd is more important to producer ‘bottom lines’ than their individual weights or quality grades. Accordingly, good maternal traits are the sin qua non of the producing herd.

The negative effect of rising doe maintenance cost on BEP is equally obvious, no matter the selling weight of kids. For 65 lb kids, if the maintenance cost is $60/doe, the BEP/lb (at 100% kid crop) is $0.92/lb. For the same 65 lb kid and 100% kid crop, the BEP/lb at $90/doe is $1.38. This difference in BEP is - $0.46/lb. The 65 lb kid nets an owner $29.90 less because its cost of production had increased by $30 (from $60 to $90; ignore the ten cents rounding error). Note that at 100% kid crop, the BEP for the two maintenance costs is $.46, but, at 150% and 200% kid crops the differences in BEP/lb between these two maintenance costs/year fall to $0.31 (.92 - .61 and $0.23 (.69 - .46), respectively. To sum: the higher the maintenance cost/doe/annum, the lower the net income.

continued on page 20...

th Winner’s Circle! SALE 11 ANNUAL

JOIN US IN THE WINNER’S CIRCLE! Complementary lunch prior to sale.

100+ Show Quality and Breeding Stock BOERS

NOVEMBER 14 12:00 PM CT MIDDLE TENNESSEE STATE UNIV MURFREESBORO, TN

www.winnerscirclesale.com Broadcast on DV Auction

CONTACTS: GARY KEMP 812-486-5410 garykemp193@yahoo.com WILMIER KEMP 812-486-7460 RICHARD COOK 217-343-9047 AUCTIONER PIT KEMMER AUCTIONER PIT KEMMER

Consignors:

Able Acres Boer Goats Gary Duncan 765-366-6000 or Sandy 765-714-4551 ableacres@tds.net

Lary & Nathan Duncan 615-957-9163 laryduncan@att.net DNW Boer Goats Gary Kemp 812-486-5410 or Wilmer 812-486-7460 garykemp193@yahoo.com Rocking C Boer Goats Richard & Sandy Cook 217-343-9047 rockingcbg@Hotmail.com Newton Farms Brant Knotts 937-631-3251 mnewton@hoosiertire.com

BAB Boer Goats Bailey Bergherm 812-870-0924 bailey@babboergoats.com JCKN Boer Goats Jason & Heather Coin 970-371-6488 dwarfs@dishmail.com

2 Bit Boer Ranch Scott & Margie Turner 512-415-6522 2bitboer@gmail.com 2M Boer Goats Paul and Kim Morgan Paul 502-643-5662 or Kim 502-639-4293 pm4881@gmail.com Carolina Connection Boer Goats Bell & Eubanks Families 803-924-8094 kdaeubanks@backroads.net

Westfall Boer Goats Cindy Price Westfall 937-215-4143 cindy_price_westfall@yahoo.com WMC Boer Goats Wayne & Mary Crider 765-294-4386 marycrider@att.net

The positive influence of increased selling weight on BEP is evident, at the same maintenance cost of $90, the BEP/ lb falls from $1.80 (50 lb kid) to $1.38 (65 lb kid) to $1.13 (80 lb kid) at 100% kid crop. If the kid crop was 200% and doe maintenance cost $90, the BEP would drop from $.90 to $.69 to $.57, respectfully, across increasing slaughter weight .

Selling weights are at the prerogative of the owner, but as Payne says, growth rates to 90 days are primarily influenced by the dam’s milk production—another illustration of the importance of maternal performance that is more important than sire influence across this time period.

The percentage of kid crop sold is the most important aspect of herd management. It is affected by numerous factors, among them genetic quality of the herd, its nutritional level, its health status and its physical environment. Put differently, if your herd is composed of animals that are not genetically disposed for maximum reproductive efficiency, your kidding rate will be unacceptably low. If it is not properly fed (as to protein, fiber, TDN and minerals/vitamins), conception rates, milk production, ADG of kids and kid survival rate will be reduced. Similarly, if your herd contains high levels of parasites and systemic diseases, reproduction rates, kid ADGs and weaning weights will suffer. If your facilities are inadequate, herd performance may be reduced by some extent and output will suffer, as will net income.

The percentage of the kid crop that is sold may be increased by practicing accelerated breeding (kidding the herd three times in 24 months). Even though this will increase the annual maintenance cost/doe by some measure, the increased kid off-take per doe will more than pay the increased cost. Payne notes here the absence of research to distinguish between breeds as to their propensity for out-of-season breeding—a necessity for accelerate breeding. There is also considerable variation within breeds in this trait, but experience has shown that young does cycling in the spring will continue to do so— most helpful for accelerated breeding. We do acknowledge that such a schedule will result in one kid crop being sold in low-price months and one kid crop being born in mid winter.

Annual doe maintenance cost is the second most important aspect of herd management. Increased costs decrease net income proportionately. Generally, feed cost (forage plus concentrates and mineral supplements) is the highest component of doe maintenance cost, but health maintenance can also be a significant outlay, as can be uncontrolled overhead costs and hired labor. Does have to bear all costs of production; the prorated cost/doe is often higher than owners think it to be (because they do not include all appropriate costs, particularly the ‘opportunitycost’ for owned land and facilities).

Doe maintenance costs in semi-confinement systems will be higher than costs than in more conventional grazing systems. However, rising land costs may alter this situation in more and more geographical areas.

Number and weight of kid off-take sold/doe is the third most important aspect of herd management. In practice, number of kids sold is more important than weight/kid.

Remember, twins generate more income that singles and

triplets generate more income than twins. Litter weight sold/doe is the critical factor affecting gross income. Triplets and quads may be more trouble to manage and may increase costs, but they are uniformly more profitable than twins and singles. The live grade (and concomitant higher prices) of sales kids is a contributing factor to gross income, but it is not nearly as valuable as numbers sold/doe.

“The higher the weaning weight of the kids, the higher the net income.”

Size of meat goat enterprises

Generally speaking, herds of meat goats in the United States typically consist of fewer than 50 does, some yearlings, some doelings and two bucks. The herds are cared for by family labor that is not typically assigned an apportioned cost/annum. There are relatively few large, extensively managed herds in the United States; most

“... increasing the size of meat goat operations to the maximum number that can be sustained with family labor would the most efficient management...”

Break-even Selling Price per Pound for Kid Goats with Different Kid

Crops Weaned, Doe Maintenance Costs and Kid Selling Weights Annual Cost of Doe $ per head

of which are in Texas and Oklahoma with some in the Rocky Mountains and in California. Research by LSU farm management scientists indicate that expenses typically exceed income in most small operations, especially when opportunity accounting is applied.

This accounting figure is calculated and assigned by charging the goat enterprise the prevailing tax-free bond interest going unearned (to clarify, it is the interest foregone on investments in land and facilities). This can be a serious sum and it contributes heavily to enterprise profitand-lost statements. For example, if one owns pasture land that cost $2,000/acre and supports one doe/ acre, the interest foregone may be

Break Even Price ($/lb)

$80/year ($2,000 x 4%). Accordingly, Kid Crop Weaned newborn twins ‘cost’ $40 each when 100% 125% 150% 175% 200% 225%they hit the ground; this sum must be recovered in their sale price, just like Selling weight: 50 lb. per head feed and health costs, etc. 50 1.00 0.80 0.67 0.57 0.50 0.44 55 1.10 0.88 0.73 0.63 0.55 0.49

Economy-of-scale economic theory 60 1.20 0.96 0.80 0.69 0.60 0.53 suggests increasing the size of meat 65 1.30 1.04 0.87 0.74 0.65 0.58 goat operations to the maximum 70 1.40 1.12 0.93 0.80 0.70 0.62 number that can be sustained with 75 1.50 1.20 1.00 0.86 0.75 0.67 80 1.60 1.28 1.07 0.91 0.80 0.71family labor would the most efficient 85 1.70 1.36 1.13 0.97 0.85 0.76 management scheme. Expanding 90 1.80 1.44 1.20 1.03 0.90 0.80 beyond that number would, of 95 1.90 1.52 1.27 1.09 0.95 0.84 course, require the addition of a hired Selling weight 65 lb. per head 50 0.77 0.62 0.51 0.44 0.39 0.34hand. However, their employment 55 0.85 0.68 0.57 0.49 0.43 0.38 is economically rational only if they 60 0.92 0.74 0.61 0.53 0.46 0.41 can manage considerably more goats 65 1.00 0.80 0.67 0.57 0.50 0.44 than are required to support their 70 1.08 0.86 0.72 0.62 0.54 0.48 wages and perks. Such a number 75 80 1.15 1.23 0.92 0.98 0.77 0.82 0.66 0.70 0.58 0.62 0.51 0.55 is always site-specific and may vary 85 1.31 1.05 0.87 0.75 0.66 0.58 across time and place. 90 1.38 1.10 0.92 0.79 0.69 0.64

The cost of production figures Selling weight 80 lb. per head you report on your annual IRS 50 0.63 0.50 0.42 0.36 0.32 0.25 55 0.69 0.55 0.46 0.39 0.35 0.31Schedule F may or may not accurately 60 0.75 0.60 0.50 0.43 0.38 0.33 reflect the annual doe maintenance 65 0.81 0.65 0.54 0.46 0.41 0.36 cost needed for BEP calculations. I 70 0.88 0.70 0.59 0.50 0.44 0.39 have helped a number of folks with 75 0.94 0.75 0.63 0.54 0.47 0.42 80 1.00 0.80 0.67 0.57 0.50 0.44their IRS F calculations over the years. 85 1.06 0.85 0.71 0.61 0.53 0.47 Some are unduly pessimistic as to 90 1.13 0.90 0.75 0.65 0.57 0.52

income; some are overly optimistic as to expenses; some are both; and some are exceptionally creative and not to be believed by an informed auditor. Proceed carefully, and accurately, or the BEP calculation is of little value.

Payne says that multi-species grazing (goat grazing followed or preceded by cattle grazing) may offer a way to increase off-take from a given enterprise. Most cattlemen could add at least one or perhaps two does per cow with very little increase in grazing costs because the two species tend to eat different plant species. Over time, goats improve availability of cattle forage.

There is the added benefit that multi-species grazing offers opportunity to do effective control of unwanted vegetation by biological means rather than by herbicides, burning, chaining, etc. This is an ever-increasing public concern and can possibly influence on-farm, direct-sale transactions to goat buyers sensitive to the provenance and care of animals to be purchased for food.