| 26/01/09
Improving physical performance must remain a key priority for most lowland sheep flocks but it has to be accompanied by better marketing and effective cost management for the greatest profitability gains, reveal detailed analyses of the latest annual Business Pointers enterprise costings by EBLEX Ltd, the industry body for beef and lamb levy payers.
Simple analysis of records from the 48 lowland sheep enterprises involved in the 2007/8 costings scheme shows a close correlation between margin-earning and physical performance, with top third performing flocks rearing an average of 167 lambs per 100 ewes compared to just 113 for bottom third margin-earners.
More detailed analysis of the records, however, shows that top physical performance is by no means essential for the best margin-earning. Nor that it necessarily guarantees good margins.
Flocks producing less than 120 lambs per 100 ewes, for instance, certainly comprise a relatively high proportion of the worst financial performers. Even so, nearly 40% of bottom third margin earners are producing in excess of 120 lambs per 100 ewes. And more than 10% are producing 150 lambs or more per 100 ewes – including one of the four lowest margin-earning flocks of all. In the same way, nearly 40% of the top third margin earners are producing less than 150 lambs per 100 ewes – including two of the most profitable flocks costed.
Financial Performance of Flocks at Different Physical Performance Levels
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Lambs reared/100 ewes
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Less than 120
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120-150
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More than 150
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Best flock net margin performance
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£2/head
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£34/head
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£39/head
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Average flock net margin performance
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-£44/head
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- £4/head
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£1/head
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Worst flock net margin performance
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-£186/head
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- £34/head
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-£50/head
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Proportion of top third net margin flocks
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0%
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37%
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63%
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Proportion of bottom third net margin flocks
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63%
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25%
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12%
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Source: EBLEX Business Pointers 2007/8 - Lowland Flocks
Alongside a good level of physical performance, the EBLEX Business Pointers data clearly underlines the value of maximising output through selling a higher proportion of finished lambs and minimising costs – particularly fixed costs.
In output terms, top third margin earners really gained by selling 64% of their lambs for slaughter and just 24% as stores while bottom third flocks sold 38% and 50% to the respective markets. While their variable costs were higher as a result, these only accounted for around 20% of the margin-earning difference between the two groups. Fixed costs, in contrast, accounted for some 40% of the financial performance gap, as did output.
As well as comparing their own performance with the Business Pointers data, EBLEX advises producers to use the Snaphsot and What If ? tools available free of charge to English levy payers at www.eblex.org.uk/businesspointers or on the new Action for Profit CD from the Better Returns Programme on 0870 2418829 as simple ways of assessing current business efficiency and planning improvements.
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