Cost structure and profitability of Assaf dairy sheep farms in Spain

Abstract

Twenty dairy sheep farms of Assaf breed, located in the Spanish autonomous community of Castilla y León and included in a group receiving technical support, were used to study their production cost structure and to assess their economic profitability during 2009. On average, farms had 89.2±38.0 ha (own, 38%), 592±63 ewes, yielded 185.9±21.1×103 L/yr (i.e., 316±15 L/ewe), and were attended by 2.3±0.2 annual working units (family, 72%). Total annual income was €194.4±23.0×103/yr (€1.0=$1.3) from milk (78.6%), lamb (13.2%), culled ewes (0.5%), and other sales (0.8%, wool and manure), and completed with the European Union sheep subsidy (6.9%). Total costs were €185.9±19.0×103/yr to attend to feeding (61.6%), labor (18.2%), equipment maintenance and depreciation (7.6%), finances (3.0%), animal health (2.5%), energy, water and milking supplies (2.2%), milk recording (0.5%), and other costs (4.4%; assurances, shearing, association fees, and so on). Mean dairy sheep farm profit was €8.5±5.8×103/yr (€7.4±8.3/ewe) on average, and varied between –€40.6 and €81.1/ewe among farms. Only 60% of farms were able to pay all costs, the rest had negative balances. Nevertheless, net margin was €31.0±6.5×103/yr on average, varying between €0.6 and €108.4×103/yr among farms. In this case, without including the opportunity costs, all farms had positive balances. Total annual cost (TAC; €/ewe) and total annual income (TAI; €/ewe) depended on milk yield (MY; L/ewe) and were TAC=161.6 + 0.502 MY (R2=0.50), and TAI=78.13 + 0.790 MY (R2=0.88), respectively, with the break-even point being 291 L/ewe. Conversely, farm TAC (€/yr) and farm TAI (€/yr) were also predicted as a function of the number of ewes (NOE) per flock, as TAC=18,401 + 282.8 NOE (R2=0.89) and TAI=330.9 NOE (R2=0.98), with the break-even point being 383 ewes/flock. Finally, according to the increasing trend expected for agricultural commodity prices, it was calculated that a 10% increase of concentrate price will require 5.2% milk price increase for constant profit. Similarly, a 10% increase of forage price will require 2.0% milk price increase to maintain profitability. Under these scenarios of increasing the commodity prices of key feedstuffs, a change of flock feeding should be expected to compensate the losses in farm profitability. Most Assaf dairy sheep farms studied were economically profitable, with flock size, milk yield, and feeding costs key for their profitability.