The higher feed costs borne by sheep farmers in the spring of 2013 had the direct impact of reducing gross margin on lowland and hill sheep farms.

The main physical and financial variables of 161 lowland sheep farms analysed are detailed in Table 1. The analysis is split into the top third of farms and the average of all farms analysed.

Looking at the physical performance, the top third of lowland farms had higher performance in terms of stocking rate and lambs reared per ewe to the ram and per hectare.

The higher output left the farms in a far stronger position to cover variable costs, which at €579 and €592, were similar across the two groups. This left the average sheep farmer in the analysis achieving a gross margin of €377/ha, while the top third achieved a gross margin of €749/ha.

When fixed costs are taken into the equation, the average of farmers in the analysis ended up eating into their premia to the tune of €22/ha to cover fixed costs.

Looking at the analysis on a per ewe basis, the average farmer achieved a gross margin per ewe of €48, while the higher lamb output per ewe in the top third of farms returned a gross margin of €82 per ewe.

If looking on a per lamb basis, the cost of producing a lamb was €74 for the top third of lambs and €92 for the average. This figure does not take into account replacement costs.

Feed and fertilizer costs

Purchased feed at €25 per ewe is listed as the largest single variable cost on farms in 2013. On average, this equated to €18 per lamb weaned.

Looking at the change in variable costs in 2012 versus 2013, costs increased in a matched sample of farms by 25%, or €135 per hectare.

Concentrate costs increased from €24 to €30 per ewe, fertilizer costs from €13 to €18, and contractor costs from €8 to €11. Veterinary and other variable costs remained similar at €10 and €9, respectively.

The consequences of higher costs in the matched sample of 72 farms between 2012 and 2013 was the gross margin falling from €531 to €415/ha, meaning that on average these farms had to dip into their premia by €60/ha to cover fixed costs for the farm.

Lessons from the analysis

The profit monitor analysis clearly shows the positive impact of increasing the number of lambs produced per ewe and per hectare (combination of litter size and stocking rate).

However, it also shows the important role that premia plays in contributing to farm income and the vulnerability to farm income that cuts to support payments has.

This is particularly important in light of cuts to the Single Farm Payment and the ending of the REPS scheme. More worryingly, the analysis does not show the bottom third of farms, as in previous years, and one can only assume that these farms had to delve deep into their Single Farm Payment to keep the farm running in 2013.

Hill sheep flocks

Analysis of 17 hill sheep flocks taking part in the 2013 profit monitor analysis shows the gross margin per ewe totalling €29, a sum not sufficient to cover total fixed costs per ewe of €34 and leading to a loss excluding premia of €5 per ewe.

The main variables from the analysis are detailed in Table 2. As can be seen, flock size averaged 144 ewes, with 0.97 lambs reared per ewe to the ram. The average lamb price per head, at €77/lamb, was relatively good for hill enterprises, given the difficulties in light lamb markets in 2013. Purchased feed, at €18 per ewe, accounted for 45% of total variable costs.

The other main variable costs were €8 per ewe for fertiliser and lime, €6 for veterinary, €3 for contractor and €5 for other variable costs.