Goat returns complement other livestock

28 September 2016

Goats are well adapted to produce robust returns on capital ranging from 16 to 49 per cent and complement existing sheep and cattle operations, an economic analysis of the benefits of mixed grazing with goats has found.

The economic analysis, commissioned by Meat & Livestock Australia (MLA) and undertaken by agribusiness consultants, Agripath, as a part of a project Benefits of Mixed Grazing with Goats examined the outcomes of introducing goats into six existing sheep and/or cattle businesses in both the pastoral/rangeland and high rainfall/farmland zones in eastern and south eastern Australia.

The study found that based on bottom line figures, producers should be considering the integration of goats in both environments, particularly where there were rough or unimproved feed sources. Furthermore, with more intensive management to maintain high kidding rates and survival, returns are competitive with traditional high performing enterprises such as lambs and trading cattle.

Market price was noted as a key driver in the profitability of the goat enterprises studied in this analysis and while producers have very little control over this, there is still opportunity to influence profitability and productivity by focusing on things within their control. This may include careful evaluation of market options, ensuring animals supplied consistently meet market specifications and evaluating business set up and land types to best match enterprises.

For example, in one case study included in the analysis, goats were used to control weeds as an alternative to chemicals. Previous control of blackberry and nodding thistle infestations in one paddock using a helicopter had cost the landowner $9,500. However, the landowner found the strategic grazing of goats was cutting reliance on herbicides and helicopter spraying and increasing the property’s profitability and carrying capacity.

The analysis also found there are few economic barriers to entry, with the capital cost of breeding does relatively inexpensive when compared to other livestock enterprises.

Western NSW goat producers Justin and Julie McClure, who feature as the producer case study in this edition of Goats on the Move, also participated in the analysis. To read their case study, please click here.

A gross margin analysis comparing purchase of feeder lambs and goats was developed using the following assumptions from the McClure’s circumstances:

  • An additional 2,000 DSEs can be run for up to 150 days without adversely impacting the existing core livestock breeding enterprises
  • 15kg mixed sex goats can be purchased locally for approximately $1/kg live weight
  • 25kg feeder lambs can be purchased at $2.80/kg live weight
  • Average growth rate for goats is 100 grams/day
  • Average growth rate for store lambs is 150 grams/day
  • At an average weight of 22.5kg live weight over the 150 days, 3,550 goats can be purchased
  • At an average weight of 36.25kg live weight over the 150 days, 2,200 lambs can be purchased
  • The OTH price for goats is $4.40/kg carcase weight (dressing 45 per cent - skin on), and
  • The OTH price for lambs is $5.60/kg carcase weight (dressing 46 per cent).

Based on the above assumptions, the gross margin analysis is compared in the below table.

Table 1: Gross Margin comparisons

Goat income @ 45% yield and $4.40/kg cwt Lamb income @ 46% yield and $5.60/kg cwt
No. of animals Value per head Total value No. of animals Value per head Total Value
3,550 Mixed sex kids @ 30kg/lwt 59 210,870 2,200 Store lambs @ 47.5kg lwt 122.36 269,192
Goat variable costs Sheep variable costs
3,550 15kg lwt mixed sex kids 15.00 53,250 2,200 Lambs @ 25kg lwt 70.00 154,000
3,550 Freight in 2.00 7,100 2,200 Freight in 5.00 11,000
3,550 Freight out 6.00 21,300 2,200 Freight out 8.00 17,600
3,550 Mustering/handling 5.00 17,750 2,200 Mustering/handling 5.00 11,000
3,550 Levies 0.38 1,338 2,200 Levies 1.83 4,026
Opportunity cost of capital 1.85% 985 Opportunity cost of capital 1.85% 2,848
Gross Margin $109,147 Gross Margin $68,718

 

The gross margin shows that 2,000 DSE of trading goats will generate an additional margin of $40,429 ($20/DSE) compared to lambs.

The greatest difference is in the trading margin (sales less purchases) of goats compared to lambs ($78.81/DSE for goats compared with $57.59/DSE for lambs). Variable costs are similar for both enterprises.

The analysis shows that based on the above assumptions, the McClure’s were better off purchasing 2,000 DSE of goats to take advantage of the additional feed as this will result in a higher return on investment.

The analysis is highly dependent on the assumed purchase and sale price for goats and lambs as well as growth rate and yield.

For more information, contact Justin McClure: jj@kallarastation.com.au

To read a full copy of the economic analysis, please click here

If you would like to undertake your own analysis there are a number of resources and training programs available to assist, including:

  • MLA market reports can be found here. These will give you an indication of prices paid for goats over time and what is happening in the market place now.
  • Calculate your cost of production per kilogram of beef, lamb or goatmeat in 15 minutes. Check out MLA’s cost of production calculator here.  
  • BusinessEDGE is a two-day financial and business management training workshop designed for livestock producers. The aim is to enhance producer knowledge and skills in basic financial and business management to improve business efficiency and profitability. For more information click here
  • Pastoral Profit is a joint initiative between MLA and Australian Wool Innovation that targets business management skills which can improve the bottom line of producers located in the pastoral region. It is designed to increase pastoral producers’ access to leading industry information, resources and technical experts. For more information click here.

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