Economic considerations for livestock farming

Economic considerations for livestock farming


The functions of livestock are an integral part of the total agriculture. Livestock is well known for converting non-edible (pasture) and low quality edible feedstuffs into food for human consumption. Many farmers go for livestock production due to different reasons. To be successful, farmers need to consider financial viability before going into actual production. The article will highlight key economic areas in commercial livestock farming.

Market and demand analysis

Sustainable livestock production is market driven. Successful farmers invest their time and resources in market research. This is very important especially in livestock as any delays in sales come at a cost.  Farmers need to be equipped on market knowledge.
Marketing involves logistics, time and form to the end market. With proper research and planning, the processes involved need to be efficient and achieved at the lowest possible cost. This means distance to the market is one of the key areas to consider when planning to do livestock. A dairy farm 300km from the market has higher cost of transportation and risk involved than one 50km closer to off-takers. In demand and supply analysis, what is of more interest is the relationship with product pricing. For example, on her research, a farmer might find out that beef demand is higher in December-January than its supply. This means prices of beef during that period are high. She can then synchronize her production for supply during that period.
Without a careful research on market demand and supply, farmers end up producing livestock for sell at low prices or worse still incurring unnecessary costs of production.
Market and demand analysis are part of a whole farm plan which includes will be discussed in a different article.


Investment decision

Ensure the value of output exceeds the cost of inputs invested. Farmers can also ask themselves if the same inputs can be used for another livestock project with a higher income. A broiler farmer for example, will ensure that his sales factoring in mortality does not exceed the production costs per bird. If for the same investment in another project will pay more, then it is wise to invest in such.
Production scale and type of livestock is determined by available investment and market demand. Factors of production that need to be considered include land, labour and capital and entrepreneurship or business management.

Land

Land size depends on the livestock system adopted.  Ranching and feedlots for example require extensive use of land than intensive land-use high-output systems. Peri-urban livestock projects specializing in broilers, layers, piggery and other small stock require small land size but production is high.  It is important for a farmer to know how much they land they need as this may come at a cost.

Labour

It is advisable to consider the availability of labour for day to day operations. There are regulations in the country on farm salaries that have to be followed.  Mechanization and technology reduces the need for manual labour and a cost benefit analysis has to be done to determine the costs involved. Use of milking machines in dairy instead of manual work is one example. Some small stock farmers have considered automated watering and feeding systems. This reduces farm operating cost without affecting output thereby increasing profitability.

Capital

Capital is required for inputs; feed, drugs, stock purchases and operating expenses. Investment required for macro livestock (cattle, sheep, goats, sheep and pigs) is higher than for small stock (poultry, rabbits, etc.). Availability of funds limit production. Partnerships and pooling resources together has worked for some in establishing livestock projects. Legal consultation on investment and partnerships is recommended.


Seasonal variability of inputs

One of the constraints in livestock production is the seasonal variability of feed. Some inputs like hay are seasonal which affects its availability and pricing. Farmers plan well ahead for such shortages and price increases. This ensures continuity and low-cost production. Some farmers have integrated livestock with crops to ensure the availability of crop residues for feed. This can be effective when supplemented with commercial feed. 
In areas without water reservoirs, a livestock farmer may consider investing in boreholes or other permanent sources to adlib availability of water. If this is not met losses due to mortality may occur.

Technical Knowhow/ Training

Livestock farmers need to invest in knowledge and research. This is an ongoing process. There are several institutions offering courses on specific livestock production. Such investment reduces costly production or management errors which affect project profitability. Proper education improves and maintains product quality, hence increased income. It helps a farmer to stay up to date with technology that can enhance production. Visits to successful and unsuccessful farmers is important for learnings and exposure. Successful farmers have also invested in business management knowledge. These treat livestock farming as an entity on its own; in the same way some are into other industries.

Security

2015 to 2017 statistics show a 2% reduction of stock theft. This however does not mean farmers should relax as 5185 cattle were stolen in 2016 alone. More investment towards security is vital to curb losses. 

Health and Disease

Disease in one of the many factors affecting productivity. It can result in high mortality due to outbreaks and may affect product quality or farm output. Animal disease control and management is imperative. Before going into production, farmers need to understand animal health and how best can losses be prevented be it through adequate nutrition, biosecurity, vaccination or selecting resistant varieties. Investment in health and diseases prevention is important.
Engaging experts in animal health including the Department of Veterinary Services under Ministry of Agriculture can help farmers manage livestock production.

Risks

Livestock farmers may occasionally face price volatility, disease outbreak, theft, veld fire, climatic shocks that may lead to losses. It is important to invest in risk management is recommended.
These critical economic areas of production affect farmer decision into livestock production and when analyzed well contribute to a successful commercial livestock farm.


About the author
Rawlings Kofi is an Agribusiness Specialist (BSc. Agribusiness, M. Phil) and C.E.O of Agribusiness Consulting. Feedback: agriconsultzw@gmail.com Facebook: Agribusiness Consulting.



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