Economic based decision support to promote sustainable small scale livestock enterprises to potential industry entrants
Abstract
Individuals looking to begin a part time agricultural endeavor or existing farmers and ranchers looking to diversify, can potentially find value in small scale livestock operations. In many cases small scale livestock operations are attractive to individuals with objectives such as to provide livestock experiences for their children or to be an outlet for their love of animals. Individuals motivated to become involved with livestock and have a small amount of land or financial capital to invest, other employment, or time constraints may find that a small scale livestock enterprise can fit within their resource constraints. Enterprise budgets were developed for small scale cow-calf, dairy steer, sheep, goat, and turkey operations. The scale of the enterprises were assumed to be 50 cow units, 25 dairy steers, 150 ewe units, 100 doe units and 1,000 turkeys. National data for input costs and market selling prices were used when available and supplemented with published prices from 2011 Extension budgets when necessary. Enterprise budgets yielded positive profits of $6.37 and $82.99 per unit respectively for sheep and goat operations. Cow-calf, dairy steer, and turkeys were found to have negative profits per unit of -$116.11, -$158.69, and -$2.38 per unit per unit respectively. The negative profit projections from this analysis provide evidence that small scale livestock operations often do not make sense from a business perspective when using profitability as the sole entry criteria. Acknowledging that the livestock enterprise entry decision is not purely a profit maximizing decision, it becomes important for decision assistance tools to address both qualitative and quantitative components of livestock enterprises. Budgets were used as the quantitative base to develop a decision support tool to assist individuals make an informed “yes or no” small scale livestock entry decision and if yes, to choose the most appropriate specie for their enterprise. The Comparative Decision Support (CDS) matrix utilizes principles from linear programming to return the maximum number of units per livestock type that can be supported given user input constraints. Estimated profitability, operating expenses, and total labor hours per enterprise are compared across enterprises. The need for a permanent structure, intensity of labor, and type of market access needed to sell animals are also provided. The user takes this multi-dimensional information and is able to compare and contrast enterprises to make an informed decision. In one instance, a couple chose a cow-calf enterprise because of their access to a traditional livestock market, low labor intensity, and use of all acreage. In this example, the CDS tool provided realistic expectations on multiple attributes of small scale livestock enterprises to enable the user to make an informed entry decision.
Degree
M.S.
Advisors
Fulton, Purdue University.
Subject Area
Agricultural economics
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