SHEEP SHOW BEST RETURN ON CAPITAL

Press, Volume CXI, Issue 32660, 16 July 1971, Page 12

SHEEP SHOW BEST RETURN ON CAPITAL

If capital is a commodity in short supply then it is far more profitable to put your money into sheep than into cattle, according to information that Mr G. F. Tate, a lecturer in the farm management department at Lincoln College, gave to a meeting held by the Cheviot Farm Improvement Club last week.

The meeting was held after a field afternoon on the Mount Alexander property of Mr J. E. Wanklyn at Waikari. Mr Tate took prices ruling in the 1970-71 season and stock performance on Mount Alexander to look at the relationships between sheep and cattle. He compared one ewe and a proportion of its replacement—a quarter of a hogget—with a breeding cow and a proportion of its wearier heifer. For the 1970-71 season he showed that the gross margin for the ewe and the proportion of her hogget was $6.45 and for the cow and a proportion of her heifer $4O. These figures • were reached after subtracting direct costs including interest on capital from gross revenue. If-on a feed requirement basis a breeding cow was equivalent to six ewes, Mr Tate said that cattle would be very slightly ahead of sheep in terms of making money, but if a breeding

cow was equivalent to seven ewes, sheep would be ahead of cattle. It was thought that the relationship was six or seven sheep to one breeding cow, so that on Mount Alexander it would not have mattered much last year whether sheep or cattle were run. But on moat farms Mr Tate said that it was not only necessary to make use of , what feed could be grown but also to obtain the best return for every dollar that was available for investment. If then a look was taken at the return on capital it would be found that the capital involved in the ewe and part hogget was $8.50 and in the breeding cow and part heifer $ll2, and taking gross margin figures in which direct costs, with no allowance for interest, were deducted from gross revenue, it would be found that for the investment of $8.50 in sheep the return

would be $7 or 84c for every dollar invested in sheep, and for $ll2 put into cattle the return was $4B or 43c for every dollar invested. In 1970-71 he noted that Mount Alexander increased _ its stock on hand by a value of about $4OOO and if capital had been the limiting resource and all of this had been spent on sheep the return would have been $l5OO more than if it had been put into cattle. But if - a farmer had , access to capital and the , substitution rate was six ewes to the cow then he would make more money 1 out of cattle than sheep. ' However if the substitution rate was seven ewes to a : cow then the advantage ; would lie with sheep. Mr Tate noted that another factor in the cattle- | sheep comparison was the I ' length of the pay-back I ; period for capital invested | 1 and in the case of sheep it | 1 was much shorter than with I 1 cattle. The labour involved in handling the two types of livestock was also highly significant and Mr Tate ‘ said he was concerned that| ; as cattle numbers increased and as cattle management became more intensive the labour advantage in favour of cattle would not be as great as it was painted. Income diversification was also a significant advantage—the security of a hedge against one product dropping in price.