# SHEEP FARMING: The search for a niche.



## The Old Ram-Australia (May 29, 2017)

Almost any farmer of average intelligence can raise a lamb, but not every farmer can raise a lamb which covers the cost of the ewe for a year and returns a profit. Producing a profit takes planning, understanding your lands capability’s and the available markets open to you.  Today’s farmer, who just produces lambs and sells them on the open market, is at the “mercy” of the buyers on the day. The reality today is that both Meat and Wool are made up of segments and buy matching your land, breeding and marketing you can maximize your return for the considerable amount of labor you will invest over a 12 month period.

Sheep Meat as a carcass segment has many facets and the main limitation is the productive value of your land, most sheep breeding country is 3rd class after cropping and cattle but by knowing just what your land can produce “now”  without investing vast sums on improving it with artificial inputs, much the same can be said for high performance genetics because as a friend often reminds me “you can’t raise them on sticks and stones” ,and the cost of maximizing their potential can “eat up” all of your potential profit.

One of the least expensive ways is to produce 1st class “stores”, but before you embark on anything you must know you’re “COP”(Cost of Production). If you are going to invest $’s, think about what you can do to reduce your production costs, it’s possible that by purchasing your own shearing gear and learning the basics (join MLA, they have a great series of DVD’s which cover every facet of the job and you can learn as you go at a pace that you can cope with .In fact I was in my mid 60’s before I mastered the art of getting the wool off and the art of sharpening “combs and cutters”).Learning about your existing pastures and which grasses perform in which season will help you with paddock management. Learn which weeds you are required to control, invest in the gear to do it yourself. Learn how to erect and repair a fence, designing a fence that will hold X-breds is not that difficult (stopping Wombats digging under it is another matter; it’s something I am working on at the minute, with some degree of success).

We have spent almost 20 years developing our line of Suffolk’s to meet a series of market outcomes depending on seasonal conditions in any given year. Each year we select for the following outcomes.

1.       Rams from the top10% of the drop to be sold at 15 mths old (only those which we would use ourselves are selected and return a premium over slaughter animals)

2.       Ewes either hogget’s or SM (Sound mouth) culls usually sold in-lamb at a premium over slaughter animals.

3.       Light lambs for the whole bar b cue market (we recently sold a line of lambs dressing 12/14 kg, which made $105 ea at a regional auction market).

4.       Store lambs to go to a feed-lot or high performance grazing (16/18kg)

5.       Lambs at 20 kg to ethnic markets finished to 3.5 BS, end of Ramadan and Eid Al-Adha (but this market is only in a very good year on our land as it stands ,or for lambs on their 2nd spring)

6.       Hogget’s which were carried over because they were to light to sell in the autumn/winter.


Our sheep raising block is 300 ACS; our cost per ewe per year is currently approx $40.00 ea, because “old age” is catching up with me we now only join about 150/180 breeders which adds to our options with carryover lambs if required. NO hand-feeding, no fertilizer adds .Jenny and I shear, crutch and drench along with fencing, weed and fox control .This post is to get you to think about your sheep farming project and ways you can improve your outcome, because it’s quite soul destroying at the end of the year to find that for all your work there is no profit outcome.......T.O.R.


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## Baymule (May 29, 2017)

Thank you for your post. I always find your posts informational and helpful. On my 8 acres, I don't think I'll have the volume needed to be profitable, but I can sell all the lambs that I can produce. This is only my 2nd batch of lambs, 4 wethers and 2 ewes. 3 of the wethers are sold as soon as they reach slaughter weight, at $8 a pound, hanging weight. Buyer pays slaughter, cut and wrap charges. So I am not exactly going to break any sales records LOL. But I keep up with all my costs and know how much I am losing.  I need more ewes.....  I am trying to improve pastures, because that would cut my production costs. Maybe some day..... We are almost finished with the fencing, which will open up more pasture for the sheep.

You said to learn which weeds to control....just this morning I was dragging a wagon, pulling up poison hemlock, pig weed and black nightshade. I realize that you couldn't do this with 300 acres, but I can, and do, on my 8 acres.


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## The Old Ram-Australia (May 30, 2017)

G'day and thank you for your kind remarks.Are your lambs straight-bred?..If so, is there an opportunity to swap them with another breeder for ewe lambs of a different breed,which can be joined to your existing ram?..Do you consider your ram to be a really good example of the breed?...Have you considered a ram swap with another local sheep farmer for one season?Your $8 a lb is about $18  kg in Aussie $ terms ,so its no wonder every nation is lining up to sell to the US market.We recently got the US eq of $6.00 a kg at the auction barn and we were really happy( it was a $105 .. on the "knock" and with a ewe cost of $40.00 annually per ewe a great profit result).
On the weed subject ,we herbicide spray only two introduced weeds ,the other two are being controlled by bio-control agents because they are not Native.We actually just "live with" some of what others consider weeds and by managing the pastures we find control just "happens"...T.O.R.


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## Mike CHS (May 30, 2017)

Another good post.  We are working on weed control but some information about what is truly a BAD weed.  Milkweed is one of those that supposedly is poison but the sheep go for them over everything else.  It may be one of those anything in moderation and there aren't many of them left.


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## Bossroo (May 30, 2017)

TOR , Great posts ! Can you be more specific in your terms that are more Ausie specific, as well as more descriptive in what is included in "ewe cost " calculation ? Land cost share, Vet., supplies, vehicles, insurance,  ewe  replacement costs, labor including yours, etc. ?   Too many here are new to raising sheep or other animals and need specifics as to record keeping to see what it actually costs in their endevors = Profit or  loss.


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## norseofcourse (May 30, 2017)

Good topic!  My situation is closer to @Baymule 's, I have 6 acres and my current core flock is 5 ewes and 1 ram.  I have 8 lambs this year, and I've had no problem selling them as whole lambs by hanging weight, as Baymule does.

I've taken a slightly different approach than some, I am marketing several different products from my sheep and learning what sells and what venues work best.  I am marketing the wool to handspinners, and I've sold both raw fleeces and roving.  I've had lambskins tanned and they sell well, too.  I also recently learned about Ohio's cottage food laws at a farm conference, and discovered fudge is on the list of allowed items.  I have been milking my sheep, and I made 4 batches of sheep's milk fudge to take to a fiber festival this past weekend, and I sold out!

My sheep (Icelandic) are a breed that has been around for centuries, so I'm also promoting the products to historical re-enactors.

In order to control costs, I have been working towards doing more of the processing of the various products myself.  I have sheared some of the adults, may someday do the lambs as well.  I have some of the equipment to process my own fleeces (a wool picker and a drum carder).  Having a mill turn the wool into roving has gotten too expensive to be able to sell it at a profit.  True, I won't make much if I count my time, but I'd rather save the money and spend the time.  By doing this, I am also learning more about my fiber and how to do the different processes, and I enjoy doing it.  I'm also wanting to give tanning the lambskins a try, with the alum-salt method.

I'm planning some fencing projects this year, which will eventually help me improve the pasture and create more sections for pasture rotation.  This should help with feed costs and parasite control.


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## Baymule (May 30, 2017)

My sheep are Dorper/Katahdin crosses. My ram is a Dorper. I purposely didn't get registered (expensive) sheep to start with. I am learning on my mixed breed. I plan on up grading to better stock. I like both the Dorper and the Katahdin sheep.

We moved here 2 1/2 year ago and there was nothing here except a doublewide manufactured home. We have made some major improvements, a 12'x54' screened porch, fencing, gates, cross fencing, a 36'x36' barn, a lean to shelter, chicken coop, hog hut, cleared dead standing trees, green briars,  planted fruit and nut trees, we are about to butcher our 2nd feeder pigs and are growing our 3rd garden. Sheep are an integral part of our homestead and I hope to build up to a better flock so I can offer registered breeding stock as well as slaughter lambs. I always appreciate yours and Bossroo's posts and the nuggets of wisdom that ya'll share.


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## Bossroo (May 30, 2017)

Today, I talked to a neighbor whose friends have a large family beef cattle operation.  They use a family friend of many decades as their tax preparer .  Problem is , this person has little to no actual knowledge of farming/ livestock operations and the ranch record keeping wasn't stellar eather. Garbage in , garbage out !!!!! So, upon going through an IRS audit,  it seems that they overpaid on their taxes to a tune of nearly $ 50,000 over the last 3 years and the cattle ranchers had no idea untill then.  Lesson is...  keep VERY ACCURATE RECORDS  of all actual costs including your own labor costs and income.  AND employ a CPA that is KNOWLEDGEABLE in farming/ ranching.


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## The Old Ram-Australia (May 31, 2017)

G'day and thank you for responses,this site is "different" in that almost every post will get a reply or comment which is "heartening" for the poster.
IMO your COP(cost of production) comes in two parts "fixed and variable",so draw up a simple spreadsheet work out which cost goes in which group and then a column for each cost.So how do you determine which is which?Fixed costs are ones you cannot avoid,like state and country taxes,vehicle costs as a proportion of your use (farm or private),power,phone ,internet,insurance,postage and there may be others in your situation.Variable costs make up everything else used on the farm for which you control the purchase of,feed(don't forget the dogs) ,seed ,fert(if you use it) tools, shearing gear,boots and clothing,materials for fencing,building,firearms and ammo,mineral supplements,etc.Always use a CPA will farming experience,a good one will more that pay for his fees in savings.
It's over 45 years since we started on our 5 ac farm and we applied for farmer status right from the start(it was easy then ,but much harder now).Keeping records will assist you into the future if you decide that a farming life is for you as you will be familiar with what information assists you in making decisions about the farm going forward.In our case we do not use outside labor(except for trades).E.G.Last year we installed a solar system with battery back-up,at that time our 3 monthly power usage was $450.00(not counting the supply charge which applies no mater how much you use),it is now $140.00 for the same period ,we had the capital available and with "bank interest " being so low we are "way ahead" and it has increased the value of the home "to boot".
Don't forget in the sales column to include anything you "eat" yourself as this reduces your" cost of living".Bossroo spoke of the value of your labor in the farm ,well for me its the profit from the farm over the year,Most farmers these days need "off-farm income",ours is a small govt pension and the interest from capital invested with a secure bank.(nothing "risky" as capital is to hard to get).
Any more questions ,I am happy to assist if I can(remember the only "silly" question is the one never asked)...T.O.R....


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## Bossroo (May 31, 2017)

TOR,  thank you for your very informative post.  As to the part of what you eat,  here in the US, the IRS code states that you can only deduct the cost of your meals only when you travel for your farm business, however the price of the meal must be reduced by 50%. This applies ONLY if your farming is for PROFIT  and you must file a farm  Schedual F.  If your farming endeavors are a HOBBY, well then these types of deduction DO NOT APPLY  !


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## greybeard (May 31, 2017)

Bossroo said:


> TOR,  thank you for your very informative post.  As to the part of what you eat,  here in the US, the IRS code states that you can only deduct the cost of your meals only when you travel for your farm business, however the price of the meal must be reduced by 50%. This applies ONLY if your farming is for PROFIT  and you must file a farm  Schedual F.  If your farming endeavors are a HOBBY, well then these types of deduction DO NOT APPLY  !


No, they don't but even hobbyist are best served if they follow much of the advice ORA has posted.
Want or need something but think it's not in your budget?
How will you know if you haven't paid close attention to what you have going out $$ wise? 
Not a 'for profit' farmer today? Don't mean you won't be one or try to be one next year and the last thing you want to do is try to learn how to keep track and get the best bang for your $ in the middle of your first attempt. 
You'll never know if your hobby is costing more than it should if you don't keep track of costs.


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## Baymule (May 31, 2017)

I keep up with costs. Having several businesses over the years taught me well. IRS? Don't even get me started......We closed a furniture store the end of 2011, in May of 2012, I received two checks from the IRS totaling over $23,000! The idiots refunded 6 months of with holding taxes and I had a hard time giving it back. @greybeard you will remember Marvin Zindler on channel 13 in Houston. I contacted him and he was delighted to have me on his news segment and make the IRS look like buffoons. He contacted the feds at the Smith building downtown Houston and sent me there. I took all my paper work proving that I did have employees for that 6 months and gave the checks back.


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## greybeard (Jun 1, 2017)

Mar...vin Zindler....*EYE*witness News...His weekly restaurant inspection segment was a hoot. "We found roaches in the coleslaw and mold in the ice machine..."

Mr Toupee himself...but he really did care about people.


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## The Old Ram-Australia (Jun 2, 2017)

G'day,what I meant by recording what you eat was if you eat a lamb you bred, you should credit it as a sale T.O.R.


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## Bossroo (Jun 2, 2017)

When recording the value of the lamb that you eat,  what value do you place on it? Do you give your tax preparor to use the price you get at the local stock auction house ( example: $0.89 / lb ), or the price of lamb at the grocery store ( example:  $ 8.99 / lb) , or ?    That could make a weeeeee bit of difference to the bottom line .


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## norseofcourse (Jun 2, 2017)

At the tax class at the farm conference last year, for animals you consume yourself, you could figure it two ways.  One would be to not count the expenses of raising any animals you consume yourself (could be difficult to figure, depending on how detailed you get in your expenses).  The other was to count as income the amount that animal/product would have earned you, based on market price or what you've sold others for.

So for last year, the lamb I put in my own freezer I counted as income based on its hanging weight, times what I got for the other lambs.  Yes, I do Schedule F.

(In response to Bossroo's other comment that was later edited out: ) I would love to get an official answer on how someone doing this for a hobby should figure it.  My gut feeling is that if you're doing it as a hobby, not deducting expenses, any animal or product you consume would not be counted as income.  If it were, that could mean anyone who has a couple chickens for personal use would have to start putting a value on those eggs they eat, and adding them to their income.  And anyone that puts in a garden would have to start adding up the value of all those beans, tomatoes, zucchini and corn and adding them to their income...


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## Bossroo (Jun 2, 2017)

norseofcourse said:


> At the tax class at the farm conference last year, for animals you consume yourself, you could figure it two ways.  One would be to not count the expenses of raising any animals you consume yourself (could be difficult to figure, depending on how detailed you get in your expenses).  The other was to count as income the amount that animal/product would have earned you, based on market price or what you've sold others for.
> 
> So for last year, the lamb I put in my own freezer I counted as income based on its hanging weight, times what I got for the other lambs.  Yes, I do Schedule F.
> 
> I would love to get an official answer on how someone doing this for a hobby should figure it.  My gut feeling is that if you're doing it as a hobby, not deducting expenses, any animal or product you consume would not be counted as income.  If it were, that could mean anyone who has a couple chickens for personal use would have to start putting a value on those eggs they eat, and adding them to their income.  And anyone that puts in a garden would have to start adding up the value of all those beans, tomatoes, zucchini and corn and adding them to their income...


You braught up an interesting point that I was also pondering. Since TOR's Australian tax code is quite different in some respects ( ? ) to the US one , I called the IRS to ask.  A IRS Auditor just returned my call. So , here it is the current official word !  The code states that an animal or produce that you raise and then consume yourself  and family only,  you just remove it from your inventory and you DO NOT DEDUCT ANY EXPENSES FOR IT'S PRODUCTION  OR ADD IT'S VALUE TO YOUR INCOME.  Same goes for a hobby farm. So Norse, sorry but you overpaid on your farm income taxes.  That is if the price difference put you into a higher tax bracket.


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## greybeard (Jun 2, 2017)

Bossroo said:


> You braught up an interesting point that I was also pondering. Since TOR's Australian tax code is quite different in some respects ( ? ) to the US one , I called the IRS to ask.  A IRS Auditor just returned my call. So , here it is the current official word !  The code states that an animal or produce that you raise and then consume yourself  and family only,  you just remove it from your inventory and you DO NOT DEDUCT ANY EXPENSES FOR IT'S PRODUCTION  OR ADD IT'S VALUE TO YOUR INCOME.  Same goes for a hobby farm. So Norse, sorry but you overpaid on your farm income taxes.  That is if the price difference put you into a higher tax bracket.


IOW, for tax purposes, it's as if that animal  never existed.


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## The Old Ram-Australia (Jun 2, 2017)

G'day, my original thoughts were directed at mainly the "hobby" portion of the group,so they could get a "feel" for how their project is performing ie. where do you stand $ wise and to help you should you in the future decide "farming" is the life for you.If you are already running a "commercial operation",you would naturally be following the tax laws that apply in your country. But I think the whole exercise has been worthwhile because of the discussion it generated...T.O.R...


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## Baymule (Jun 3, 2017)

I agree, this is a good discussion. Even if someone has their animals for their own enjoyment and consumption, it is good to keep up with expenses.


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## norseofcourse (Jun 4, 2017)

Bossroo said:


> You braught up an interesting point that I was also pondering. Since TOR's Australian tax code is quite different in some respects ( ? ) to the US one , I called the IRS to ask.  A IRS Auditor just returned my call. So , here it is the current official word !  The code states that an animal or produce that you raise and then consume yourself  and family only,  you just remove it from your inventory and you DO NOT DEDUCT ANY EXPENSES FOR IT'S PRODUCTION  OR ADD IT'S VALUE TO YOUR INCOME.  Same goes for a hobby farm. So Norse, sorry but you overpaid on your farm income taxes.  That is if the price difference put you into a higher tax bracket.


It didn't put me in a higher bracket, so I didn't overpay.

For me, it's much easier to add the value of the animal kept for my own use, than to try and deduct the fraction that animal cost in each of the expense categories I track.  It also bumps up my 'gross farm income', which is a factor in my area for qualifying for 'farm' property tax rates, since I don't have the minimum required acreage.


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## Bossroo (Jun 12, 2017)

norseofcourse said:


> It didn't put me in a higher bracket, so I didn't overpay.
> 
> For me, it's much easier to add the value of the animal kept for my own use, than to try and deduct the fraction that animal cost in each of the expense categories I track.  It also bumps up my 'gross farm income', which is a factor in my area for qualifying for 'farm' property tax rates, since I don't have the minimum required acreage.



The " bump" is what is known as creative accounting and will eventually catch up with the tax payer by creating  a red flag on the IRS computer with guidelines preset for anomolies  and then the tax payer will receive an invitation for a tax audit.  Could become costly one day.


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