great lakes dairy sheep symposium - the Department of Animal ...

allow a variety of farms with different situations to gauge their direct cost of production against
other farms to determine if their cost of production is higher or lower than other farms.
By benchmarking the average and range of costs in each of these categories, farmers will be
able to determine how they compare to others in the industry. If, by using the standardized
calculation, a farm determines that their cost of production is significantly higher than other
farms, that farm will be able to compare their costs across the different categories with other
farms to determine in which category(ies) their costs are out of line. By being able to identify
problem areas, the farm can concentrate on different ways to bring these costs down.
Conversely, if a farm finds that their overall cost of production is at the lower end of the scale,
they can help to establish ‘best practices’ in the sheep dairy industry that other sheep dairy farms
can follow to be more successful. Today’s presentation will follow the format outlined below.
We will start with an overview of farm accounting in order to establish the framework in
which the standardized direct cost of milk production model is built. This will be followed by a
discussion of the definitions for the various terms and categories used in our model. These
definitions are essential in order to establish a ‘common language’ between sheep dairy farmers
that can be used in future discussions. A good example of where the lack of having a common
language is seen on a recurring basis in the sheep business is when farms discuss their lambing
percentage. Some farms calculate the number of lambs born per number of pregnant ewes,
others calculate the number of lambs born per number of ewes exposed, others count the number
of lambs weaned per number of ewes exposed, still others count … the variations are too
numerous to describe. We will then discuss the types of records needed to calculate your direct
cost of production and provide some tools that will make the record keeping process from
becoming too cumbersome. Throughout these discussions, we will solicit feedback and
comments from the audience. Clearly, the only way this project can be successful is if the
majority of farms understand and agree with the approach. Following our presentation, we will
make modifications to the proposed standardized approach based on the audience feedback. The
finalized standardized approach, and supporting tools, will then be available by the end of
December 2006 for anyone to download from the WSDC website (Sheepmilk.biz) so you can
start using the tools in 2007. Prior to next year’s symposium, we will solicit the results from
participating farms for a presentation to the general membership. We will establish a process for
you to anonymously provide this information so that your identity will be protected.
Outline of Approach
1) Present the bigger picture of farm accounting
a) Farm Enterprises
b) Direct, Fixed and Overhead costs
c) Complexities of accurate accounting
d) Today’s session goal as a subset of the big picture
2) Define basic parameters
a) Terms and definitions
b) Standardized set of cost/expense categories
c) Determination of direct vs. fixed cost
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