Sheep math, running costs edition

Our running costs for sheep look like they will end up about $150 per sheep per year.  This is hay, minerals, vaccines/vet, water and other consumables (including the shearer).  This isn’t counting infrastructure like the fencing or the hay feeder they eat out of.  All the sheep can provide one fleece per year, and the ewes are supposed to additionally provide 2 lambs average per year.

I am not sure how to assign the rams a cash value for fathering the lambs, so I’ll just note that the ram fleeces would have to bring in $150 apiece to cover their running costs.  To keep things really simple, the ram fleeces are likely to yield 5lbs of raw fleece after shearing and skirting of rough ends.  This means carding the fleece into roving (moderate level of processing, maybe three hours a fleece).  Roving sells for about $35-40/lb.  So we would have to do some processing with the ram fleeces to get enough per pound to cover their running costs.

Things are much easier with the ewes, who provide lambs and fleece and lamb fleeces!

The ewe fleeces will yield less, they were sheared late summer last year and the rams were never sheared at all (being lambs when we bought them).  The ewes should give about 4lbs of usable raw fleece after skirting.  For each lamb, 1.5lbs of raw fleece is a good estimate.  So each ewe ideally would give us 7lbs total to sell to cover running costs. Lamb fleece routinely sells for $25/lb raw, so that is $75.  Ewe fleece is more like $20/lb raw, which is $80 and covers running costs.  There’s just the skirting time, which is not much time at all.  So if the ewe twins, the fleeces can just about be tossed in a sack and sold to cover the running costs.

If the ewe has only one lamb, turning that fleece into lamb’s roving would get the same $75 (lamb roving is softer and gets closer to $50/lb), but would take an hour or so of carding labor.  And you could still sell the ewe’s fleece raw with no extra labor. So a young ewe that doesn’t twin in her first breeding could still produce enough fleece to cover her running costs with a relatively modest increase in labor.

We only have six sheep and we expect at least one ewe to single, so we are expecting to do some processing of wool this year along with our journey into the world of wool selling.  We have to make 12-14 fleece sales and plan for about a day’s labor carding and then we have from April to December to make those sales happen.

I was going to get into meat sales with the lambs, but I don’t think we’re going to sell more than a couple for meat this year.  With so few animals, we are likely to keep the lambs back to grow the flock.  We’re nervous about lambing, it’s already next month and the next few weeks will be vaccinating and putting down more straw in the barn.

The ewes seem to be doing well on the daily mineral and are less pale.  So here’s hoping they bear some nice healthy lambs to shear at all.

 

 

Sustainable Economics: A High Return Model

Over at Thoughtful Food’s farm blog, there’s been an interesting discussion about types of farms and various paths to earning a profit with farm income.

I made a couple of comments offering an example of a high return model that would yield enough farm income to pay off even a 400k house and barn on 5-7 acres in under a decade.  The model was specialty wool and meat production from sheep.  There are several breeds of sheep whose wool is highly valued in the specialty wool (handspinning, felting, crafts, etc) market.  The meat can often be sold at a modest premium compared to regular lamb, and there’s also the breeding stock/pet fiber animal possibilities for further income.

With specialty wool, the top end is currently right around 90/lb for finished yarn in skeins and the bottom end is around 10/lb for raw fleece, usually skirted (trimmed of the worst poop bits and leaves/etc).  An adult ewe yields 8-12lbs of wool annually after washing and skirting, depending on the various specialty breeds out there.  Twinning is usual, so those two lambs yield 2-4lbs combined of lamb’s fleece, added to the ewe’s total.

Lowballing, that’s 10lbs of wool per ewe per year.  That’s 100-900 dollars per ewe per year.  Not all ewes will have fleece that can go to the highest-value yarn.  So the midpoint there is 500 dollars per ewe in fleece sales to account for wool sales having such a wide range per pound.

At  500 in wool per ewe, the two lambs will yield 300 each at a modest premium as meat and 400 each as breeding stock.  So that is 600-800 in lamb sales per year per ewe.  Now we’re up to 1100 per ewe per year in wool plus lamb sales.

Five acres can stock  25-35 ewes, six 30-40 and seven acres can stock 35-50 ewes.  This gives 55k/yr at 50 ewes and 33k/yr at 30 ewes.  I am handwaving the ram issue for now, but there is room to grow into an aggressive program of getting 70-90/lb for wool sales and selling meat animals at breed stock prices.  And with hitting those aggressive targets, on five acres stocking 30 ewes, getting 1600/ewe is pretty close to 50k/yr off less than 3 dozen animals.

This is a labor intensive model, no sugar coating on that one.  Carding, picking and cleaning wool is challenging, as are the husbandry techniques to minimize skirting and dirt accumulation and the practices to get excellent quality wool production.  But the customer base exists and the sales are good enough that shepherds can come close to the higher-end numbers for pure fiber flocks, no meat sales.  That is nearly 1k/ewe just for wool alone annually.  And ewes live 15-20 years.

This is just one example of a high-labor, high-return model.

Duck Tales: Depressing Duck Math

Though the ducks are laying cheerfully, I did find most of the receipts for the ducks and well, even if we achieved peak production for this month and December (daily laying from the Khakis and the Cayuga finally laying a couple eggs a week this month and next), we’d be in the hole on the ducks by quite a bit.

The waterers endlessly leaking and being super expensive was the problem.  We dropped a lot on waterers designed for indoor poultry, though we didn’t really think that part through when we got them.  So, sucky!  We’ll have to do some kind of hanging thing sometime in the next few weeks and see how that goes.

We spent about $120 on various feeding and watering contraptions, mostly waterers.  The ducks themselves cost $47 and one had to be killed for severe congenital problems.  The first 75lbs of feed was just starter ration to get them to laying age.  We’re now at 120lbs of layer ration used so far.

The starter was about 20 a sack, the layer 14 or so a sack.

Without projecting the additional costs of more feed (we buy layer 80lbs at a time, and in a week or two we’ll be through 160lbs of feed), we can only “earn” about $170 in market value for the eggs this year.  But we’ve spent about $240 all told and have to buy more feed to get them to year-end.  Figuring 80lbs/month, we’ll close the year out having spent about 300 dollars on all costs for the ducks, with a maximum of about 170 dollars in egg value from 4 layers.

And peak laying is 8-9 dozen eggs per month with that many.  Current  market value of a dozen duck eggs is about $7, so each month the ducks would be producing (if all four lay) 56-63 dollars worth of eggs.

If we have to kill the second Cayuga for being a dud, we won’t get to 170 bucks this year and our laying max is 7.5 dozen, or $52.50/month in egg value.

So, even at peak laying, we don’t see a breakeven on the ducks until sometime in March.  Now, doing it this way loads all the expense at once, amortizing the ducks’ purchase price and the equipment over 3 years (reasonable laying lifetime at good high numbers per month) makes that 170 for the year look a lot nicer.

To summarize:

• All expenses at once– $170-$300= $130 loss at peak laying numbers.
• Amortizing equipment and animal purchase price over 3 years– $170-$100= $70 profit at peak laying numbers.

We may not get peak laying, I’ll revisit this in January and obviously if I have to kill the Cayuga, I’ll note that as well.

Our labor is negligible, the ducks take a couple minutes a day, even moving the run takes seconds.  I was pretty surprised, it seems longer some days, but 5 minutes is a long duck-tending day.  Water costs are a few dollars annually.  And of course, feed is the biggie.  They eat a variable amount daily, sometimes a quart, sometimes three, they clearly get a lot out of the fresh grass and bugs they have access to.  But right now a safe guess is 80lbs/month, or about $340/yr, rounding a bit.

So right now, next year the ducks would bring in $625-750 in eggs at peak laying, which compares ok with the feed estimate above.

I am less depressed now, yay!

Sustainable Economics– Starting with Chickens Isn’t Sustainable

If you’ve spent any time in the world of sustainable farming folks, you’ll hear tons of stories about raising chickens and/or their eggs.  A lot of people into this type of farming love them some chicken-raising.  However, it’s just not sustainable at the medium level of several hundred birds/dozens of eggs a week.  This is a pretty interesting postmortem for a chicken-centric operation, Soul Food Farm, that is now at hobby/homestead levels of production.

A huge problem with Soul Food Farm was starting with chickens.  From there numerous other problems flowed.  Starting with chickens is absolutely fatal to a small-scale operator. I am distinguishing backyard chickens from small-scale farming efforts here.  Having a few backyard chickens is fine and generally pencils out ok for most people.  The problem comes in scaling up.  Like vegetable farming, people get excited about the high per-unit profits (wow, 20/25/30 dollars a chicken!!!) and fail to understand the economics coherently.

Chickens are tiny, all current models of production for wider sale are industrial to some degree, and the labor to profit ratio is pretty poor until you are producing thousands of birds per week or so.  At that hundreds of birds per week where most sustainable types get to and crash hard, you’re generating a decent cash flow, but you’re suffering the worst ratio of labor to effort and also have most of the same high fixed expenses as the people with 10k+ chickens for sale each week.  But because those small farmers start with a few chickens, they get into buying more and more birds and doing a lot of the care inefficiently and not really catching up to the problems until they are overworked, exhausted and unable to afford to stop when disaster hits.  

Whether it’s free ranging pastured eggs or broiler production, chickens are the kind of livestock where you really have to go big or go homestead/hobby level if you want to still be in business at the ten year mark.  Fifty chickens to clean up after your family cow is manageable.  Five hundred, not so much.  And it really seems to be an artifact of starting with chickens, not so much having chickens around.

In the specific case of Soul Food Farm, the high labor requirements of focusing so much on chickens left them unable to deal with issues like arson and non-animal predation.  In one of the articles mentioned in the postmortem up above, another chicken-specializer mentions losing 25k of cash value in chickens to theft– given the arson that destroyed much of Soul Food’s production animals, it is very likely theft was a potential obstacle they had to cope with as well.  That is of course another reason chickens are bad to start with at this level.  Petty theft of a dozen here, fifty there and suddenly you have mysterious 25% or 30% losses, destroying your margins.  And again, chickens are tiny, and the pasturing model makes it just difficult enough to keep track of hundreds of birds that it would be quite possible to miss small occasional thefts that added up over time, separate from animal predation issues that are also potentially margin-wrecking at that scale.

Where we live there is, for example, occasional theft of firewood where people live off busy main roads, to pick something that is also easy to run off with small amounts of, but which adds up to a problem for the families losing it over time.  With thousands and thousands of birds, those losses aren’t either as damaging or as likely due to how one has to manage that volume of birds.

My husband and I were discussing the postmortem for Soul Food Farm, because there was a lot going on there and it really did seem to us that it kept coming back to starting with a high-labor, low-margin animal that is hard to protect.  And we were thinking of examples of people who started with chickens and everyone we could think of scaled back or went big.  Chickens are a great add-on animal, but they don’t seem like they work out so well as a primary farm product unless you go into some high-volume model.

 

Duck Math, Lessons Learned

The ducks are past 18 weeks and now laying 1-2 eggs a day, so we don’t have to buy eggs right now and may not have to through winter.  We are ok with moderating our intake to what they lay and next year storing any excess when we get our first full laying year.

The big lesson for us was that at this little homestead level, there is no point in buying ducklings.  It was great to learn how to raise them and go through the basic process, but the cost of starter for just a few ducks is more expensive than buying someone else’s grown ducks who specializes in selling adults.  Freshly hatched from the feed store, each duckling ran us 9-10$.  We could have bought three or four guaranteed laying adult females for 15-25$ each in late spring and already had eggs for months.  And the cash value of a dozen duck eggs is pretty high, so it would have penciled out within a few weeks.

I am not sure it will pencil out this year, it depends on if we start getting 3-4 eggs a day and if the ducks will lay through late fall and early winter.  It is no loss, though, the ducks will have paid for their costs of purchase and feed by spring.

I think it’s just surprising sometimes that there is a justification for letting others specialize even at relatively low levels.  But then again, specialization has always been a part of homesteading, farmsteading and farming.  It’s just hard to remember with the media promotion of mixed-use farming as if it doesn’t also require some specializing.

Sustainable Economics– Asking the wrong questions about organic food production

The Atlantic brings us an example of industrial agriculture setting the agenda.  It is completely true that you can get higher yields with GMO crops using industrial production methods versus going organic or sustainable with those same crops.  GMO corn, soy and wheat are not the only things humans need for complete nutrition, yet we are expected to embrace industrial production because it is still producing high yields of those crops.  Industrial production doesn’t work so well on potatoes and other root vegetables, or perishable vegetable crops.  Industrial organic is obviously not going to be as good as specially subsidized, cheap-energy fueled industrial non-organic.  And the much-praised industrially produced ‘golden rice’ is not yet proven in its task of supplementing a crucial vitamin.

Genuinely sustainable production is mostly regional, mostly adapted to the climate of the given region, can include organic methods, but it’s not mandatory, and is often more labor intensive. This can be limited to ramp-up with many things, though, and then it can be much less labor-intensive on an ongoing basis.

Energy is already a lot less cheap, and those much-trumpeted industrial yields are not as reliable as they once were believed to be.  And when you account for soil fertility issues, runoff damage, lower nutritional value and a complicated subsidy environment propping up farmer incomes in wealthier countries whether they actually produce or not, those absolute yields look very different.

I can’t figure out why people keep getting suckered into this trap.  It is a trap, because you can’t win if you are playing on the industrial field, with industrial help.  It’s obviously not going to get the same results.  But humans are not corn/soy/wheat machines, we need to eat other stuff, and industrial agriculture is not conclusively better or higher yielding for much of that more essential stuff.  People supportive of organic and sustainable alternative agriculture methods and practices really shouldn’t be allowing the industrial standard to predominate the discussion.  It’s just so insidious.  Diversity is key, not building up an ever more elaborate edifice of one-crop agriculture.

Getting past an entitlement mentality in sustainable farming

Courtesy of that farmer I mentioned yesterday comes yet another grist special about farm financing.  I dunno, I see these articles around and about a lot and what it boils down to is that people seem to expect tens or hundreds of thousands (or more) for business models that aren’t likely to pan out.  Like, there is a 5 acre ‘farm’ mentioned in the comments that had trouble getting farm financing.  That ‘s not really a financially viable farm size.  It is fine as a homestead or a hobby, but not a working farm, as a solid rule of thumb.

I do think there is some valid critique about lenders not being open to mixed-use, more diverse farming models, but it’s hard to see past the entitlement mentality.

My husband and I are getting a little homestead together and if that goes well, we’ll try to farm for real, but we worked really hard to save up some reserve to buy equipment, stock, etc. and I never see anyone mention that. It used to be (at least where I grew up) that a farmhand (which is what ‘farm manager’ means in practical terms) who wanted their own set something aside over years until they had some kind of down payment or reserve for equipment/seed/etc., even if they were mostly living off room/board and very small wages. They didn’t go around crying that the USDA wouldn’t lend them the money. But, that was a couple decades ago. Now nobody thinks you need savings to do anything, I guess.

Sustainable Economics– When farmers fail math

I don’t know how often I will do this, but I’d like to start an occasional series on the nitty gritty economics of sustainable production.  I think a good start is noting some of the problematic aspects of current models of sustainable farming.  Today is looking at a bit of math fail from a sustainable farmer.

This farmer complains about “suits” at banks not advancing financing while admitting they don’t have the cashflow to cover a conventional loan’s terms and that they rely on customers for “loans” which are really gifts or agreements for deep discounts.

There’s some more in the linked article, but the valid points (that farming, being cyclical, needs to have that cyclical nature considered in financing models and lending small sums is sometimes loss leading even in fairly small regional/local banks even if the loan is repaid on schedule) are a bit lost due to the whining and refusal to be professional on the part of some farmers when this issue comes up.

Lending with repayment on a quarterly or trimester schedule is not exactly way out there in terms of business lending, but works pretty well with the cyclical nature of farming and is not quite as overwhelming to the farmer as semiannual repayments would be.  And local banks could band together and create a farm loan pool for all farms in a given region to slash their servicing costs.

But you’ll note neither of these things is in the article, despite it being an article about small farm financing difficulties.  This is altogether too typical when the topics of small farming, sustainability and economics are discussed in the media.  The article also doesn’t discuss the craziness that is borrowing from your customer base.  Here’s a hint– if you have to borrow from your “customer base”, you aren’t charging enough in actual prices to cover your expenses at a minimum, much less enough to cover your expenses and then draw a salary to live upon.

Having said that, it is not beyond the pale to have investors who started out as customers, or to work out some kind of communal-ownership arrangement.  But the article isn’t really dealing with unorthodox, inventive, or alternative business structuring.  It’s trying to argue that sustainable farmers shouldn’t have to worry about crazy things like profits and returns on investments.  But they should, like, be able to get loans on any terms that suit them and customers should both buy their products and give them money, just because.

If you support the “sustainable” in “sustainable agriculture”, it’s important to demand that farmers treat their enterprises as real businesses with real business obligations.  Professionalism matters.  Sloppiness kills, not just animals, but economies too.  We can’t get away from the industrially centered agricultural economic model so long as customers support sloppiness and laziness about the financing details from small, sustainable producers.  It is quite simply not sustainable, lasting, or real.  And more than farming techniques, the economics need to be there for sustainable agriculture to be a feasible alternative to industrial agriculture.  And that means dealing with the hard math and working to turn a profit and cashflow enough to justify financing support.