Sheep: The Tariff Free Industry

By: Paul Kuntz

Are we in a trade war? I do not think I know what a trade war is, exactly. In my lifetime I have seen disputes over softwood lumber and claims of agriculture products being dumped. Of course, we all remember 2003 when the border shut down to livestock trade with the bovine spongiform encephalopathy (BSE) crisis. But as for a trade war, I am puzzled as to how it works and if anyone actually wins.

I was recently at a trade show and sale for the sheep industry. Compared to almost all other agriculture sectors, this industry is still trying to feed our domestic market.

The sheep industry is unique in many ways but from an economical point of view, the main difference from other Canadian industries is that we only supply 40 per cent of the lamb meat consumed in the country. The other 60 per cent has to be imported. This has and still is creating an exciting opportunity for producers. This opportunity is not being hampered by outside events like trade wars. All this industry is trying to do right now is feed Canada. So whatever happens to tariffs and trade wars, this industry will not be affected.

Unlike other agriculture industries, there is not much of a barrier to entry. There are no quotas that you have to purchase. Relatively speaking to cattle, the livestock is inexpensive to purchase as well as the equipment needed to handle them. It can be done on a part-time basis, so you do not have to change what you are doing now. The land base to have a flock can be small in comparison with cattle.

Another unique aspect of sheep is the quick turnaround. First, a lamb is ready for market somewhere between 90-120 days from birth. So this means that in our harsh climate, you can actually have a lamb born on green grass and be ready for market before the snow falls. If you compare that to cattle you are looking at 12-15 months to finish a beef market animal. At six months of age, sheep can begin breeding. With a gestation of approximately five months, you could have an ewe lamb born and in 12 months, that ewe lamb could have a lamb of its own. This is an aggressive practice that not all sheep producers do, but it can happen. That quick turnaround can allow for flock growth in a much faster pace than beef cattle. If your ranch had a heifer calf in the spring of 2018, it will be bred sometime in 2019 and can have a calf in 2020.

In order for any venture to have long-term success, there must be profit. A lot of us understand the cattle markets. There has been profitability going back 10 plus years with cattle. The past three years have been okay, but nothing like 2013 and 2014 where we experienced record profits. Depending on the hay shortages in your specific area, some of that profit may have disappeared into higher than normal feed costs in the past two years.  Regardless of your individual situation, there is profit on cattle.

Let’s take a look at some of the numbers. We will compare a sheep operation to a cow/calf operation. The sheep operation will be a 250 ewe operation that is classified as semi-confinement. This means that the operation would have lambing pens set up, the flock would be confined and fed through the winter, and in the summer the flock would be on pasture. The numbers we are using are courtesy of the Saskatchewan Sheep Development Board.

The cattle operation we are going to look at will be a 150 cow operation and the numbers are courtesy of Manitoba Agriculture. The operation will be a cow calf operation. We will assume the cows are on pasture for the summer and we will be selling calves at the 550 lb weight.

To make the numbers a bit more universal, we will only include the variable costs. When it comes to facilities and equipment, you can add in your own numbers if you like. Pasture costs will be removed as well because they can vary greatly depending on your situation. We will show the numbers as a per/breeding unit cost, so the sheep will be $/ewe and the cattle are $/cow.

An easy ratio to compare sheep to cattle is 6:1. So for housing, pasture and equipment, you can have about six sheep for every cow. Based on that, the six sheep would bring you $117.20 X 6 = $703.20, for every cow which brings $500.28. Based on that math, there is an argument that sheep are more profitable.

There are many other aspects to consider besides the mathematics of finance. You need a higher level of predator control with sheep than you do with cows. The fencing is usually a lot more intense than a cow fence. Dealing with a sick ewe takes as much time as dealing with a sick cow but now you have six times as many animals to look after. Every area of Western Canada has a market for cattle. Not every area has an easily accessible market for sheep.

Another area that is misleading is the weight of the calf being sold. If you have the feed, facilities, and expertise, you can grow that calf much bigger than 550 lbs. There will be additional feed costs but for the most part, your fixed costs will not increase. On the lamb side, there is not a lot of extra weight that you can add. At 100 to 110 lbs, the lamb is finished so there is no real opportunity for back grounding.

As of July 1, 2017, Statistics Canada reports that Canada has 12,950,000 cattle and 1,546,600 sheep. So there are almost 10 times more cows than sheep. Regardless of the current trends, sheep are not taking over cattle in this country. They do provide a unique opportunity though.

There are not many agricultural commodities produced in Canada that do not require an export market to exist. Canada has a strong reputation across the world and we need not fear relying on sales outside of our border for the existence of an industry. But it is comforting to know there is still a market that is purely domestic. In fact, the international community has been decreasing in sheep so the 60 per cent of our lamb that we rely on from imports will be more difficult to obtain in the future.

If you have a few acres of land and the permission of your municipality to have livestock, you might want to look at sheep. If you have a ranch and want to diversify, you might want to look at sheep. If you want your kids to have some animals and would rather have them deal with a 180 lb ewe versus a 1,500 lb cow, you might want to look at sheep.

This is a very vibrant growing industry that has a bright future. All of our provinces in the west have associations that can assist you in getting started.  Take a look and see if it is right for you.