Livestock production budget: A planning, decision making tool

by Sunday News Online | Sunday, Aug 13, 2017 | 863 views


ONE of the constant complaints you get from smallholder farmers is that they are not getting value for their animals when they take them to the market regardless of whichever market.

The general outcry is that farmers are selling our animals for a loss or they are not being given competitive prices. While this cannot be wholly disputed it is important to note that in some instances farmers come with outrageous expectations and when reality brings them down they cry blue murder.

While livestock pricing and the livestock value chain is a complex matrix which is also subject to abuse and manipulation by some unscrupulous players, it is important for farmers to have basic market intelligence skills.

Market intelligence will help the farmer to understand the ins and outs of the system as well as the ups and downs. You need to know these so that you are always in sync with the trends. Coupled with this intelligence, farmers also need to understand their production costs. This is glaringly missing among smallholder livestock farmers.

Farmers cannot tell you how much it cost them to produce the animal they are selling. Consequently because you do not know how much you spent raising the animal you are not able to appropriately price the animal.

This also makes you to be a price taker instead of dictating the price of your animal.

Farmers need to be assisted to have a basic farm unit budget especially beef production enterprise budget.

A budget is by definition a planning and decision making tool and hence a basic budget should be able to assist farmers to plan and make decision about their enterprise including selling their animals.

Honestly, if you do not know how much it cost you to produce the animal you are selling, you definitely do not have any ground to claim that you have sold at a loss.

Loss is not determined by the fact that your animal fetched less than what your neighbour got last month but by certain calculations.

It is also by being able to calculate production cost through a simplified budget that farmers can determine whether they have a viable herd or they need to increase the herd. I have seen farmers with herds as small as 10 animals and having a stock man who is employed for the whole year.

The herdboys are usually paid amounts around $60 a month which translates to $720 for the whole year.

Essentially what it means is that you are paying the stockman a fully grown cow every year from a herd of 10 animals! Our smallholder communal herds do not drop calves every as they should because of a host of management factors and hence you will actually pay out a cow with not even a single calf born. This is a pretty rudimentary analysis with a lot of assumptions made but the point is after making such an analysis you may discover that your herd is too small to warrant a full time stock man and you may need to explore other options or cost cutting measures.

There are many lessons that can be deduced from a simple livestock production budget which can guide a farmer in his/her decision making process rather than having ad hoc impulse based decisions.

Another important factor which continues to elude most farmers is price determination of their animals.

This can be based on the budget derivation and or many other contributory factors. I have seen a farmer selling a cow which has had more than eight lactations and still asking for a premium price. The farmer can even boast that this cow is the foundation for all these animals in his/her kraal (le yiyo eyadabula isibaya sonke).

In the farmer’s mind this is a strong marketing point when in fact it is the opposite. The number of calves or lactations that a cow has had is like mileage on a vehicle. A low mileage vehicle will generally cost more than the one which has covered a bigger mileage.

Calves are actually a depreciation factor on your cows and therefore the asking price should reflect this depreciation. If you understand this you will appreciate why heifers generally cost two times higher per kilogramme compared to cows, they are low mileage!

Uyabonga umntakaMaKhumalo.

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