Mike Caskey
Pipestone Lamb and Wool Program
Minnesota West Community and Technical College

SHEEP 99-9

The maximum production philosophy instilled in agriculture during the last 50 years has conditioned the nation's farmers to believe that the answer to today's low profit margins is to farm a few more acres or run a few more ewes and you will make it. As a result many producers are focusing on getting bigger rather than on getting better. At Pipestone we are trying to communicate that the economic payoff in sheep production is in getting better along with getting bigger.

These two business strategies, getting bigger versus getting better, represent quite different philosophies. However, both are targeted toward increasing business profits. Getting bigger focuses on expanding your capital base to gain control over more resources. Getting better focuses on expanding your on-farm information base to enhance control over existing resources. In the first philosophy you spend investment capital. In the second philosophy you spend management time. Spending management time enhancing control over existing resources gives a manager more management information and power. It is my observation that management information leads to increased net incomes.

Production agriculture, for years, has somehow kept perpetuating the myth that you can farm without business or financial management practices. Livestock producers may be the poorest at using these practices and as a result many producers are trying to survive without adequate management information. By adding financial management practices and business management practices to their management arsenal, producers can add management power to their sheep enterprise.

Improving your management power starts with compiling on-farm data like flock performance data and business financial data and then analyzing the data. But on-farm data itself has little or no management power. The power comes from the conversion of on-farm data, through analysis, to management information that can be used to improve decision-making.

The first step to enhancing your management is to identify and measure some key financial and production indicators for your sheep operation. Our experience in working with hundreds of sheep operations tells us that there are four key production measures that have a significant impact on profitability and when analyzed is a great management tool. They are:

The other key measure is a financial profit and loss statement that evaluates input costs and return per ewe.

Sheep producers have long been good caretakers of their sheep and are certainly hard workers. Most have not, however, focused much energy on managing their investment capital and their on-farm management information. Usually these sheep operators' management is limited to off-farm information because little or no on-farm production data or financial management data is collected or analyzed. Managing without farm specific production and financial data greatly reduces that operator’s management power. This limitation is not so serious during times of high prices, but it will take its toll during low price periods. My experience is that those producers managing without data specific to their operation tend to be the higher cost producers.

Business managers say that what we collect on the farm is management data, but it only becomes management information when it is changed into a form that affects decision making. In many cases, sheep operations are not taking time to convert their limited on-farm data into a form that good management decisions can be made. They are just too busy farming a few more acres and running a few more ewes. Most farmers hardly have time to even record their business transactions in their accounting system, let alone convert it to manageable information.

I suspect that a lot of you can identify with the producers that are too busy to manage. Yet management is what is going to ensure the survival of sheep operations. We need to realize that bigger is not necessarily better --- smaller is not necessarily better --- but being better is essential.

Being better means we must collect on-farm data -- convert it to manageable information - manage our operation based on the management power this information gives us and in the end we will have a greater economic payoff.