Kate and Hamish run a 3,000 head self-replacing Merino ewe enterprise on 920 hectares near Narrandera, NSW. They are considering management changes to the operation in the near future. To make an informed decision, they need to understand the performance of their current production system and they have hired you for this purpose. Your task is to construct three budgets: a livestock reconciliation, a gross margin and a whole farm budget, and to evaluate the performance of their first cross operation. Use the following information:
In March each year 80% of the Merino ewes are run with Merino rams for a four week joining period to produce 19 micron wool. The remainder of the ewes are joined with Border Leicester rams to produce first cross lambs.
Lambing commences at the start of August, with the majority of lambs dropped early in the month.
All lambs are marked in October and a marking rate of 90% is typically achieved.
Lambs are weaned in November at an average rate of 94%. Between weaning and sale lamb mortalities usually average 2%.
Merino lambs and first cross wether lambs are sold over-the-hooks at 10-11 months of age, or once they have reached their target medium trade carcase weight of 20kg/head.
First cross ewe lambs are sold as maiden ewes at 16 months of age. Over the past five years, prices for Kate and Hamish’s first cross ewe hoggets averaged $230/head.
Merino ewes are cast-for-age (CFA) in November, or after their sixth breeding season. Ewe mortalities average 2.4% each year. Sufficient Merino ewe lambs are retained on farm to replace these losses.
Rams are kept on farm at a rate of 2% for six breeding seasons. On average two old rams die each year. The CFA rams are typically sold for $70 per head, and replacement Merino and Border Leicester rams purchased in January for an average $1,600/head.
All sheep are shorn in December and crutched in June.
The Merino flock produces 19 micron wool. Adult and replacement Merino ewes typically cut 5.4 kg/hd, Merino rams 7.6 kg/hd and Merino lambs 1.15 kg/hd. After accounting for yield (fleece, skirting and carding) and proportion of clip, adult and hogget Merino wool averages $8.68/kg greasy, and Merino lamb wool averages $3.95/kg.
Border Leicester rams typically cut 8.2 kg/hd of 32 micron wool, and first cross lambs cut 1.15 kg/hd. After accounting for yield, Border Leicester ram wool averages $3.57/kg greasy, and first cross lamb wool averages $1.62/kg.
Adult sheep and replacement ewes typically crutch 0.38 kg/hd, and lambs 0.27kg/hd. Adult and Merino lamb crutchings average $4.50/kg, and first cross lamb crutchings $1.82/kg.
External labour is hired for shearing, crutching, wool classing and handling.
Adult sheep, replacements and hoggets are drenched twice per year, and vaccinated once per year.
Lambs are drenched and vaccinated three times prior to weaning and vaccinated once post weaning.
Ewes are pregnancy scanned 40 days after the joining period.
Kate and Hamish graze their flock on mixed perennial pastures at a cost of $43.00/ha per year. Supplementary feed is also required at a rate of 240 tonnes and cost of $192/tonne.
Infrastructure on the farm, including fences, sheds, yards and water troughs have a combined depreciation rate of $24,500 per year.
Kate and Hamish also manage a winter cropping activity on their farm which generates a gross margin of $32,000 per year.
Overhead costs include:
administration costs: $5,350
insurance and worker’s compensation: $9,500
permanent labour: $0
fuel and oil: $12,000
electricity: $7,300
repairs and maintenance: $13,750
rates: $3,700
Tasks
Construct and show a livestock reconciliation budget for Kate and Hamish’s Merino ewe activity.
Construct and show a gross margin budget for the activity.
Construct and show a whole farm budget.
Advise Kate and Hamish on the current and future profitability of the farm and possible options to improve performance (500 words).