Economic substantiation of the production of sheep breeding products in the farms of Ukraine

Abstract

Activation of the development of sheep breeding in Ukraine is possible based on the spread of specialized farms for breeding and growing sheep for meat, which will contribute to the economy of rural areas, employment, and welfare of the population. The article presents the main results of the research on planning the economic efficiency of the production of sheep products in farms, taking into account the market conditions of Ukraine. The optimal structure for the organization of production and sale of sheep products is proposed and substantiated, which includes breeding, growing, slaughtering sheep, and entering the market through direct sales channels with sheep meat, wool, sheepskin, and main by-products, which will significantly increase the profitability of the farm compared to traditional business models in sheep breeding, which are focused on breeding and rearing with the sale of animals in live weight. The planning of the need for fixed and working capital, which is necessary for the organization of production of sheep products in a family-type farm with several 200 ewes, has been carried out. The cost of production of sheep breeding products by main species was calculated, which at the beginning of the project was 2.8 euros for 1 kg of lamb, 1.4 euros for 1 kg of wool, and about 10 euros for one sheepskin. It was determined that the required amount of advanced capital for the organization of the farm would be 88 thousand euros, which will be compensated by net cash flow in 3 years. The farm is predicted to produce and sell products in the market for a total of 54,000 euros in the first year, which will potentially increase to 80,200 euros by the end of the project, which will fully compensate for costs and ensure a net profit of up to 20,000 euros EUR per year at the end of the project implementation period. The estimated amount of net cash flow for five years is EUR 77,000, with an internal rate of return of 26.3 %. The ratio of net cash flow to the cost of capital will be from 33 to 63 %, which justifies the relatively high level of investment efficiency in the production of sheep products in family farm farms following the technical and economic features of the business described in the article. The influence of the production volume of sheep breeding products on indicators of investment effectiveness is also determined. It has been established that an increase in the number of ewes from 200 to 500 will increase the net cash flow by an average of 15-16 thousand euros per year for every 100 head of increase in the number of sheep with a simultaneous decrease in capital costs per head.