Livestock
Sheep management
Take stock to manage the flock during drought
Droughts are unavoidable but their costs can be minimised with rational planning. This article outlines all the issues to
consider when managing flock during pasture deficits.
by
Karl Behrendt,
AGRORUM CONSULTING
areful planning can reduce stress and
limit negative financial effects when
managing sheep during drought.
Detailed planning based on an honest
look at the farm’s physical and financial
resources will allow sound business decisions
to be made.
Droughts usually occur when pastures
have underperformed during the main
growing season and little surplus pasture has
been produced.
If above-average out-of-season rain fails to
fall, the available pasture at the end of the
growing season will not be sufficient to carry
stock through to the next growing season
without supplementary feeding or placing
stock, pastures and soils at risk.
In southern Australia, available feed during
summer and autumn depends on residues
from the previous spring.
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deliberately blank
52
Nicole Baxter
C
A sacrifice paddock could be worth considering if soil and pasture reserves are to be protected.
For annual pastures, aim to leave 1000 kilograms dry matter per hectare. This will help minimise erosion
and provide a base for pasture growth and regeneration after the drought. For dense perennial pastures
500–600kg DM/ha may be sustainable. For lighter soil types, aim for about 1200kg DM/ha.
If spring growth has been poor, drought
conditions are likely to prevail during
summer and autumn.
In northern areas, if summer growth has
been poor, low pasture residues during the
following winter place farmers at risk to
drought, as was the case this year.
In areas with uniform rainfall where
pastures have the potential for year-round
growth, it is difficult to predict the onset and
duration of a drought.
The first step is to assess the resources
available for maintaining flock production
(see Figure 1).
Pasture resources
Flock production hinges on the health of
soil and pasture resources.
Protecting soil and pasture resources from
severe degradation needs to be a priority in
any drought management plan.
This
requires a residual of ground cover to be
maintained while using as much available dry
matter as possible.
As a guide for annual pastures, 1000
kilograms of dry matter (DM) per hectare is
sufficient to minimise erosion and provide
for future pasture growth and regeneration
after the drought.
For dense perennial pastures, 500–600kg of
DM/ha could be sufficient to protect soil and
pasture resources.
For paddocks with weeds or light, erosionprone soils, 1200kg of DM/ha at the seasonal
break would be more acceptable.
Using these targets, it is possible to assess
how much feed can be consumed.
The feed budget will allow for any changes
in the flock’s feed demands and pasture
deterioration due to decay, trampling or
fouling (see Table 1). When calculating total
feed reserves, include any fodder reserves that
are unsaleable such as pit silage.
The final carrying capacity is a guide to
how many stock could be kept and how
many would need to be sold if no feed
was bought.
Before buying feed, consider the farm’s
equity as well as the cost-benefit of feeding
versus selling.
Available equity
The next major resource for maintaining
flock production is the farm’s available equity.
This will vary depending on the current level
of borrowings, past profitability and the stock
selling strategy.
Remember, any money borrowed to keep
stock alive usually will be a non-earning
investment that will need to be repaid from
future earnings.
At a glance
• During drought, make every effort
to protect soil and pasture reserves
from severe degradation.
• Estimate feed reserves and
livestock requirements to decide
how many stock to keep or how
much feed to buy.
• Money invested to keep stock alive
will usually only buy time and will
not increase future earnings.
• When the predicted feed budget
outlook is poor, it could be
worthwhile selling low-value stock.
FA R M I N G A H E A D
No. 130
October 2002
Sheep management
In other words, money invested to keep
stock alive will usually only buy time and will
not increase future earnings.
This is because expected changes in
capital value rarely compensate for stock
maintenance costs. The exception is flocks
with unique and profitable genetics.
Deciding whether to sell or keep stock
during drought requires honesty as
there are few commercial and stud flocks in
Australia that could not be replaced with
more profitable or equally performing
bloodlines.
Keep the value of genetics in perspective
when faced with the high cost of maintaining
a production system but do not ignore the
problems encountered with restocking,
especially in terms of introducing disease.
Lateral and flexible thinking on options for
using feed and equity reserves provides more
opportunities for minimising the costs of
drought (see Figure 1).
Options could include selling all stock in
good condition and replacing them with stock
at half the value as the drought progresses or
taking in agistment and investing surplus
capital off-farm.
But for most farmers a balance will need to
be struck between using available feed
reserves, maintaining the most profitable
TABLE 1 Example of calculating basic pasture and feed reserves
Total kg of DM/ha at the end of the
growing season
30%
Net pasture available (kg DM/ha)
Non-saleable feed reserves (kg DM/ha)
610kg
For example, 1000 tonnes of pit
silage over 1000ha at 30% dry matter
300kg
Total feed reserves (kg DM/ha)
Pasture for consumption + reserves
910kg
Days till expected break
For example, November to May
180 days
Carrying capacity (DSE/ha)
Assumes a DSE consumes
1kg DM/day
5DSE/ha
Total DSEs to be maintained using
existing reserves
Assumed over 1000ha
5000 DSE
*Will vary by 0–60%. Decay will be 0% when pasture growth is similar to the rate of decay, 25%
in perennial pastures, 40% in annual species dominant pastures, 60% in very high quality
clover-dominant annual pastures.
Source: Triple P.
livestock for future production, conserving
soil and pasture resources and maintaining a
viable business after the drought.
Saleable feed reserves
Regard as expendable any on-farm feed
reserves that can be traded quickly.
Deficit to
next break
No deficit with
on-farm fodder
reserves
Being in this position enables
producers to play the market
and capitalise on the situation
that will develop as a drought
progresses. Options to profit
from a drought include timely
sales of surplus feed, be it either
through grain or fodder sales or
agistment, trading of stock
coming out of the drought or
swapping the flock for more
productive sheep as the
drought progresses.
Both the short- and long-term
financial consequences need
to be assessed.
1610kg
1000kg
Pasture available for consumption (kg DM/ha) Net pasture – residual
End of growing
season
Opportunities to
make money
kg DM/ha x (1 – wastage)
Residual at break (kg DM/ha)
When a lack of rainfall causes pastures to slow in growth
and hay off, assess the feed and livestock condition. The
question to be answered is whether or not there is enough
pasture on offer and stock condition available to carry over
animals until the start of the next growing season.
Surplus to
next break
2300kg
Pasture decay*
FIGURE 1 Decision flow chart for managing flocks during drought
Feed budgeting indicates
there is enough feed to
carry the usual numbers
of stock through to the
next growing season
without having to use any
conserved fodder or
supplements.
Livestock
Equity available
This provides the option of
buying feed to maintain a
proportion of the flock.
But this also means that
the cost–benefit of feeding
needs to be considered as
more often than not the
cost of drought feeding is a
non-returning investment.
In using finance to try and
retain more stock, only
enough should be borrowed
that can be safely repaid
within 3–5 years after the
drought.
Feed budgeting indicates
that there is not enough
feed to carry the usual
numbers of stock through
to the next growing
season. An option is to use
conserved feed to reach
the next growing season.
Before deciding to use feed reserves to
maintain stock, calculate the cost–benefit
using real market prices.
Calculating the real market price of feed
will identify if there are opportunities to swap
stored feed for more cost-effective feed on an
energy basis.
It will also identify whether selling stock
and stored feed is more profitable than
This space is
deliberately blank
Deficit with
on-farm fodder
reserves
No equity available
In this situation the only
option is to sell enough
stock while balancing
the remaining feed and
cash reserves. It will
require production and
financial budgeting well
beyond the end of the
drought as often the
lowest trading income is
experienced in the years
after the drought.
Source: Agrorum Consulting.
FA R M I N G A H E A D
No. 130
October 2002
53
Livestock
Sheep management
carrying the animals through the drought.
Such rational economic planning enables
producers to stay focused on ensuring the
business’s long-term survival.
To estimate the cost-effectiveness and
quality of various feed supplements for each
livestock class see Farming Ahead, No. 128,
page 55.
How long will the drought last?
When formulating a drought management
plan one of the most critical issues and
biggest uncertainties is the drought’s
duration.
Historical rainfall data and long-term
climate forecasts can help predict how long
the drought will last.
Historical rainfall data can help generate
the probabilities of droughts breaking by
particular months.
The probabilities of receiving rain will vary
dramatically between areas and depend on
how much rainfall, including follow-up, is
required to break the drought.
The probabilities generated can be used in
a drought management plan to estimate
whether current feed resources will be
sufficient to carry stock or how much feeding
might be required.
But probabilities only indicate what could
result as there is always the chance a drought
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I N F O R M AT I O N F O R A G R I C U LT U R E
54
TABLE 2 Indicative stock selling strategy
Sheep
Cattle
1. Cast for age ewes or wethers
1. Non-pregnant cows or heifers (after joining)
2. Bottom 10% of weaners
2. Cast for age cows (more than eight years of age)
3. Bottom 30% of wethers
3. Unfinished steers (cost-benefit of feeding)
4. Bottom 20% of ewes
4. Late calvers (third cycle)
5. Remainder of wethers
Source: Agrorum Consulting.
will not break when expected. In southern
Australia, a risk-taking producer would
gamble on a seasonal break during February
or March while a risk-averse producer
would bank on a break during June or July.
Either way, the drought management plan
needs to consider all potential outcomes.
Stock selling options
Developing and being committed to
a well-planned and rational stock selling
strategy is an important component of
drought management.
When developing a stock selling strategy,
consider current and future capital
values for each stock class, the potential for
future income and market trends before
the drought.
Be realistic when determining the expected
change in capital value. Historical price
analysis shows the slump and price
peaks during and after droughts never
last long.
Stock prices usually return to their
pre-drought trend within 12 months.
For producers with more than one
enterprise, underlying market trends and
changes in capital values will be even
more important.
For example, before the onset of drought in
mid-northern Australia the cattle market
showed signs of a downward trend.
This means beef prices could move back
toward their long-term average during the
next few years.
With lamb, mutton and wool markets
looking strong during the next few years,
the capital value of cattle post-drought
is expected to be significantly lower than
values pre-drought.
Maintaining more sheep dry sheep
equivalents than cattle DSEs could increase
post-drought income and maintain higher
livestock values.
The drought could offer a good opportunity
to unload the herd and either wait to move
into a sheep flock when prices hit rock bottom
during the drought or use available feed
reserves to make money from the sale of
fodder, grain or agistment.
On a stock class basis, future income
generation potential is related to genetics.
It is often the best breeding females in a flock
that top this category due to their capacity
to build flock numbers after drought.
As conditions deteriorate and feed becomes
scarce, identify and sell animals that have the
least potential to generate future profit.
The ranking of certain animal groups will
change during the year (see Table 2) but just
how many stock are sold will depend on
feeding costs and predicted future returns.
Putting it all together
Tailoring a drought management plan to a
specific property requires many calculations
and an analysis of numerous ‘what if’ scenarios
to develop the best strategy.
Firstly, set up a pasture–feed balance sheet
that includes the anticipated changes in
livestock feed demands as well as showing how
the feed deficit–surplus situation changes with
changing livestock management options and
stock selling strategies.
Use this information to generate estimates
of future production and income, as the
period following a drought can result in
low income and high expenses due to flock
rebuilding costs.
The next step is to overlay the overhead,
variable and capital expenses of the business to
generate cash flow forecasts.
The predicted feed costs will need to take into
account when the drought is expected to break.
Ideally, calculate a series of ‘what if’ scenarios to
check the impact of various management
options on the business.
Cash flow forecasts will provide essential
information on the likely changes in business
profitability as the drought progresses and any
impacts on business equity.
A 3–5-year cash flow budget will help
assess the long-term productivity and
financial consequences of various drought
management options.
About the author
Karl Behrendt is a consultant and partner
with Agrorum Consulting, Bathurst, NSW.
He provides agricultural consulting, farm
analysis and training services to farmers.
Email: [email protected]
Phone: (02) 6337 2086 Fax: (02) 6337 2087.
FA R M I N G A H E A D
No. 130
October 2002