Early January is always a good time to take a look back at the financial and physical performance of the farm during the previous year, especially on sheep farms.
The earlier this task is carried out the better. Leaving the review until later in the year means there are fewer opportunities to address the problem areas for flock management, such as lamb mortality.
Completing a farm review every year allows a solid amount of data to build that shows annual trends. This process will identify which areas of management are improving and vice versa.
Completing a review
On the farms participating in the programme, benchmarking (profit monitor) is currently being carried out.
The results from this exercise will be published in the coming weeks, once all results have been tabulated and finalised.
When it comes to completing a farm performance review, this should be carried out through your local advisory service, although it is possible to make a solid attempt on your own.
Most of the data required can be easily tabulated using invoices from livestock sales and receipts on purchases, as well as any services used.
The figures produced at the end of the exercise can be expressed as two measures – either on a per hectare farmed basis, or on a per ewe basis.
Don’t just focus on financials. Taking the time to look at the physical aspects of the farm, such as percentage of lambs weaned, scanning rate and liveweight produced is also important.
To complete such a review, break it down to three main sections to include output, inputs and general overheads associated with the business.
Output is basically what stock was sold last year and the income generated. It should also take account of any replacements joining the flock, whether these are homebred or bought in.
The vast majority of Irish sheep farmers will have offloaded all 2020-born lambs (except replacements) before they end of the year, leaving just the core breeding stock as the only animals on farm at the outset of the year. This is what makes January a natural time to review performance.
From sale invoices, tally up how many lambs were physically sold last year, as well as the income generated and total liveweight produced. Do this for animals sold live and sold direct for slaughter.
Once these figures have been calculated, you can then work out an average carcase weight and average sale price for lambs sold.
You will also need to factor in sales of cull ewes and rams, as well as any other animals sold last year, such as in-lamb replacements.
When working out input costs, they should be split into variable and fixed costs. Variable costs are the inputs that are directly related to livestock.
These inputs will alter from year to year, depending on the number of animals in the flock and the quantities purchased.
For instance, as breeding numbers increase, the tonnage of fertiliser is likely to rise, as a higher stocking rate requires more grass to be grown.
Similarly, concentrate feed levels will vary with stock numbers, silage quality and weather patterns such as drought.
For variable costs, include all inputs associated with grassland, such as fertiliser, lime, grass seed and any fodder purchased for winter feeding.
Next, include all forms of purchased concentrate, followed by any veterinary and animal health inputs.
Miscellaneous expenses such as tags, lick buckets, clipping, winter grazing, haulage, water troughs and fencing materials should also be included under variable costs.
When completed and tallied up, break this figure down as a per-hectare farmed value, or on a per-ewe basis. This is a good way to compare farm progress year on year.
Fixed costs are those expenses that are not directly related to any particular enterprise, such as livestock.
Instead, they generally have to be paid every year, regardless of whether livestock numbers expand, reduce or remain static. In most cases, they have to be paid even if farming activities cease.
General fixed costs include machinery repairs and running costs. Machinery and farm insurance should also be included, along with repairs to sheds, general farm maintenance, water, electricity and phone costs.
Any paid labour and financial commitments on farm loans also come under this heading, and again, when all costs are tallied, break this down to a per-ewe or a per-hectare basis.
When all costs and sales have been tallied, the next step is to deduct inputs from farm income, which should exclude direct payments such as BPS.
The aim of the review is to get a handle on direct running costs. Farm payments can be factored in afterwards to determine if the business can stand on its own or if it relies on subsidy payments.
There are some farms that operate multiple livestock enterprises and it is more difficult to apportion fixed costs, or inputs such as fertiliser, to a particular part of the business.
Such factors are usually accounted for when using an independent farm advisory service.