2022 Cost of Lamb Production
A brief look at what it cost to produce a lamb in 2022 for our farm
Last year I put together an analysis of our cost of production (see 2021 post here). I have repeated the exercise for 2022 with the same methodology. There’s been no adjustment for inflation in terms of the value of a dollar, these are numbers directly from my year-end statements with accrual adjustments.
It wasn’t the greatest year, lamb prices averaged down from the past two years and we had struggles with flock health. We did manage to produce 35% more hay which went a long way to helping build our feed stockpile. Like most farms, we saw increased costs for most purchases.
Methodology
I calculated these numbers by taking the financial statements and adjusting for inventory and prepaid expenses. As an example, we don’t buy straw every year so the cost of the straw is what we paid at the time of purchase multiplied by the number of bales used in 2022. These are cash values; depreciation, labour and taxes were not factored in. I kept all the categories and calculations the same as last year for a fair comparison.
The adjusted costs were then divided by the number of tagged lambs we produced for the year. If you’re a new reader, we have a confined operation that feeds mainly forages and barley. We produce light lambs and sell them before they reach 80 lbs. We are using a modified accelerated system, this year the ewes got about 1.3 lactations in.
I did track the quantities of feed we used this year, it’s similar to last year. Last year we had more ewes lamb twice for more lambs produced but the number fed didn’t vary significantly. We did have fewer lambs overall and higher mortality which definitely increased costs. All costs are expressed in dollars per produced lamb unless otherwise noted.
Feed Costs
Feed costs increased to $101.11 per lamb from $89.56 in 2021. The breakdown is as follows with the 2021 comparative in brackets.
Grain purchases $20.76 ($15.86)
Creep, pellets and supplements $8.77 ($10.23)
Mineral and salt $1.46 ($1.29)
Purchased hay $24.29 ($29.49)
Homegrown hay $45.83 ($32.69)
The cost that increased the most is barley which jumped from around $300 per tonne to $450 per tonne in 2022. We did have roughly 15 tonnes locked in at the beginning of the year which kept the cost from going up even more. Hay costs are also up thanks to increased fertilizer costs, diesel and some investments in tile drainage through the course of the summer. Since we produced more hay, the cost per bale did not vary much from 2021 but the cost per acre increased. The cost per bale of hay was still around $45. Our fuel bill for the equipment more than doubled.
Other Variable Costs
Variable costs are the costs that change with the number of livestock on hand. The total variable cost increased to $146.08 per lamb from $118.64 in the previous year. This breaks down to:
Feed costs as above $101.11 ($89.56)
Veterinary costs $4.59 ($4.61)
Breeding costs $10.02 ($2.09)
Bedding $11.52 ($6.96)
Marketing $18.84 ($15.42)
Veterinary costs are not really different despite the numerous issues we had. If you’re wondering whether a dose of Baycox for every lamb is worth it, I’d say it is, clearly it didn’t impact my costs. Breeding costs are mostly new breeding rams bought during the year, I bought several more rams than usual.
Bedding is up because straw costs more now and we did use a bit more as we had less dry hay. Overall, we sold more lambs so marketing costs increased on a per-head produced level. In actuality, selling costs per lamb sold decreased to $20 from $26.41 in the previous year in part because we started hiring and filling entire trailers instead of paying for a per-head hauling service.
Fixed Costs
Fixed costs are incurred no matter what while variable costs change with the number of lambs. Due to 2022 economic conditions, we did see our fixed costs increase:
Farm vehicle costs $9.90 ($6.88)
Building maintenance and utilities $11.20 ($7.41)
Property costs $37.11 ($32.58)
Other costs $7.49 ($8.69)
Vehicle costs include gas and a repair to the farm truck. Utilities are up 36% from last year, we have a separate meter on the barn. Property costs include interest, property taxes and insurance. We do not have any lending other than for the farm and barn; the entire increase there is from producing fewer lambs and insurance went up as it does every year. Property taxes and interest remained the same.
This brings the total cost per lamb produced to $211.78 from $174.20. This was both expected and disappointing at the same time. We did try our best to keep costs in line. Revenue declined as the overall market lamb price declined. In 2021, lamb revenue for our farm was approximately $225 per lamb sold but in 2022 it was $192. We had lambs on feed for a lot longer due to an outbreak and ended up marketing over a third of the lambs after the drop in prices.
Costs Per Productive Ewe
Since we produced fewer lambs this year based on where the ewes were in the productive cycle, I thought I’d calculate another cost of production measure. I counted the number of ewes that produced at least one weaned lamb for the year and worked out the costs based on that. The costs were the same ones as above, I just used a different denominator.
Productive ewe = a ewe who weaned at least one lamb between January 1 and December 31
Overall cost per productive ewe: $445.40 (2021 - $416.49)
Feed cost per productive ewe: $212.61 (2021 - $214.12)
Interest cost per productive ewe: $53 (same)
On a per ewe level it does show that we did manage to control most of our costs reasonably well. We spent significantly less on purchased feed this year going from $136 per ewe in 2021 to $116 per ewe in 2022. As stated above, homegrown hay costs increased significantly. The majority of the 2022 increase was in fixed costs, namely, insurance, vehicle operating costs and utilities.
Final Thoughts
2022 was a rollercoaster on many levels. We did manage to keep the costs directly associated with feeding the lambs under control as best as possible. I had forecast that 2022 would be a challenge and made decisions accordingly so that we did at least breakeven. Calculating costs on a per ewe basis might be more realistic for our operation going forward as we undergo some major changes. Most of the increases were out of our control and some expenses had to be incurred like finally tiling certain parts of the farm. Now it’s onto a new year with new challenges.
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The value of tax planning
A tech review of the Tru-Test tag reader
Small Ruminant Lentivirus (aka Maedi-Visna)
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