21 November 2023

What sets the top and bottom performing sheep farms apart?

The recently published Mid-Season Lowland Lamb Enterprise Factsheet, generated from the Teagasc National Farm Survey 2022, sheds light on the economic performance of sheep farms in Ireland last year.

Representative of 12,288 sheep farms nationally, the National Farm Survey shows that profitability, as denoted by net margin, declined by 54% when 2022 returns were compared to the year previous.

This occurred due to total production costs rising by 13%, stemming from increases in concentrate, pasture and forage, energy and fuel, and other fixed costs to name just a few. When all costs are combined, it put the average cost of production at €1,367/ha for the farms represented in the survey.

With gross output levels being largely unchanged from 2021 through 2022, this resulted in an average net margin of €131/ha on sheep farms in 2022 – back from €284/ha in 2021. Additionally, the factsheet also presents profitability on a per ewe basis, standing at just €12/ewe in 2022, back from €36/ewe in 2021 – a decline of 66%.

For more detailed information on the profitability of sheep farms in 2022, access the Mid-Season Lowland Lamb Enterprise Factsheet here.

Variation at farm level

Examining averages alone can be dangerous and interestingly, the factsheet also identifies the output and profitability differences between the top, middle and bottom thirds of mid-season lamb producers in 2022.

Table 1: Variation in output and profit; top, middle and bottom thirds mid-season lamb producers 2022

Farms operating in the top third generated a gross margin (before total fixed costs) of €1,509/ha – over 5.5 times higher than those operating in the bottom third. These top performing farms in terms of profitability carried 4.59 additional ewes per hectare in comparison to the bottom third, while their weaning rate was 1.56 lambs per ewe – 0.33 additional lambs per ewe over those in the bottom third. As a result, gross output on the top farms was €2,273/ha, compared to €1,444/ha on the middle and €797/ha on the bottom third of farms. Due to higher stocking and weaning rates, output on the top farms was almost three times that on the bottom performing farms.

As a result of higher stocking rates, the top third farms did have higher costs of production on a per hectare basis, with concentrate, pasture and forage, and other direct costs all being higher than the middle and bottom group. However, when expressed on a per ewe basis (total direct costs divided by stocking rate), farmers operating in the top third had the lowest direct cost per ewe, standing at €80.44/ewe, which compares favourably to the middle (€104.37/ewe) and bottom (€107.11/ewe) third of producers.

It appears that much of this variability occurred due to the ability of the top third of farms to maximise the use of pasture and forage in the production of lambs, as opposed to concentrate feeds. Again on a per hectare basis, farms in the top third had the highest concentrate and pasture and forage costs at €323/ha and €241/ha respectively. However, when broken down on a per ewe basis (cost divided by stocking rate), the cost of concentrate was €34.49/ewe and pasture and feed costs were €25.34/ewe on the top performing farms. Farms operating in the middle cohort had concentrate costs of €34.24/ewe, while those in the bottom third spent €46.14/ewe on concentrates. Additionally, in terms of the pasture and forage costs, these were €241/ha (€25.34/ha) on the top farms, €202/ha (€27.56/ewe) on the middle farms and €227/ha (€46.14/ewe) on the bottom third of farms.

To conclude, although the profitability as denoted by net margin did decline on sheep farms over the course of 2022, farms which had a focus on stocking the farm appropriately, maximising the number of lambs weaned per ewe joined and producing lamb from grazed grass and forage – the cheapest feeds available on farm – faired best.

Also read: Research update: Aiming to eliminate concentrate supplementation to finish lambs