FARMING WITH AGRA PROVISION
Published: 01 Feb 2017

The financial viability of a livestock enterprise on a 1,500 hectare farm
Agra ProVision brings you a scenario of the farm financial viability, based on a scenario of a 1,500 hectare farm in a Question and Answer session as below.

What is the economic value of livestock production?
A farm has natural resources, primarily forage and water, to be used by livestock.  The livestock reproduces and their offspring is sold.  These sales generate income or money. What is critical is that income per unit of land is sustainably optimised and that is primarily a function of production. 
Ø:  Can you explain how much money can be earned on a unit of farmland? 
Lets’ take a unit of a resettlement farm in the Khomas region as an example:
The unit measures 1,500ha and has sufficient water, good rangeland with palatable grasses and bush.
Three people (two men and a woman) will be employed on a full-time basis to manage livestock (goats and cattle) and attend to general farm maintenance. 
If we make a statement that the farm can generate a net  income  or  a  surplus  of N$ 120,000.00 per year, which translates into N$ 10,000.00 per month, it might be considered as overambitious or even unrealistic. 

But let’s try to explain how we derive at this statement: 
The number of livestock is based on a stocking rate of 1 Livestock Unit (LSU) per 15ha, thus approximately 100 cattle can be kept on the 1500ha farming unit.
Cattle eat primarily grass but not the bush or browse. This means, that in addition to cattle, the farmer can keep browsers – such as Boer goats or Damara sheep (Please take note that sheep are actually selective grazers, but Damara sheep tend to be predominantly browsers, thus foraging on browse).
The stocking rate for browser in the Khomas region can be based on 3ha per SSU.  That would translate into 500 small stock which would be difficult to manage.  So let’s agree on a manageable unit of 100 Boer goat does. 

So we base our calculation on a scenario of a farming enterprise with 100 cattle and 100 goats.

Let’s start analysing the cattle production enterprise:  
The most common practice is to keep a cow herd and sell calves with weaning at age of approximately 7 months. This is referred to as the weaner calf production system.
In such a production systems cows account for about 66% or two thirds of the herd or the carrying capacity of the farm.  This translates into keeping 66 cows on the farming unit of 1500ha.
If the herd is well managed, it can reasonably be assumed that it achieves a weaning rate of 80%.  
In practical terms it means that the 66 cows will produce 53 calves (equals 80% weaning rate) which can be sold. 

In reality however, each year some culled cows are sold and some replacement heifers kept back instead.  The current net market price of a weaner calf is about  N$ 3000.00 per calve, and the sale of 53 calves therefore will generate an income of N$ 160,000.00.

To achieve such good production levels, the farmer needs to invest in the herd in the form of: 

• Nutrient  supplementation such as licks
• Vaccines and other health remedies 
• Parasite control remedies
• Sound herd management by capable people who need to be reimbursed

Now allow me to state the applicable costs without going into depth with regard to the calculation thereof.  The following costs apply to the livestock enterprise consisting of 66 cows:     

Product    Cost    Description
Lick costs    N$ 48,000.00    5 months green grazing – Jan – May = 6000.00 & 7 months green grazing June – Dec = 42,000.00

Parasite control    N$   6,300.00    3 x pour-on 4500.00 and 2 x dosing 1800.00

Vaccination    N$   1,000.00    Generally recommended 3-in-1 vaccine – Anthrax, Botulism & Black quarter

Labour    N$ 18,000.00    Based on cost to farm of 1500.00 pm = 18,000.00 for one person attending to cattle herd 

Cost of water    N$   6,000.00    Costing various from farm to farm – 500,00 pm  - N$ 79,300.00    

That adds up to total production costs of N$ 79,300.00 = N$ 80,000.00, which is about half or 50% of the income from sale of calves. 

Income from sales Less:      

Direct production costs 
Surplus for cattle enterprise         N$160,000.00
-    N$  80,000.00
     N$  80,000.00

It is a norm for extensive livestock production, that about 50% of income derived from sales are reinvested in production costs. 

Can you explain how much you can earn by keeping 100 Boer goat does?  

The purpose of keeping goats is to utilise the browse or bushed not used by cattle.
Although the farm can maintain much more that the 100 does, it will become a challenge to manage. 
A common production system is to sell young goats with less than a year at auction. But it is also viable to keep the young goats and sell at a later stage.   

Does produce twins and single lambs, thus it can be reasonable assumed that 100 does can produce 150 kids per year.  However, to be more on the safe side, we base our scenario on weaning and producing and selling 120 kids from 100 does.  It is therefore a common practice to keep young does for replacement of culled does which are sold instead.

If there are 120 goats to sell at a current market price of N$ 600, 00 per goat, an annual income of N$ 72,000.00 can be generated from a 100-doe Boer goat unit.  However, to achieve this sound production levels, good management and the right production inputs are required.

Most import is capable and committed flock management and it is stated that women in general have excellent qualities in this regard.  For this purpose we make a couple (husband and wife)  responsible for management  of the goat enterprise and pay them  N$ 2,000.00  pm or  
N$ 24,000.00 per year. 

Therefore, labour or management costs constitute the main costs of this enterprise.  
But as stated previously, sound management is imperative to success. 
The other applicable cots constitute of the following:  
Nutrient supplementations or lick
(Browse & pods are more nutritious than grazing – thus not a major requirement and cost factor.)    
N$ 6,400.00
Parasite control:   N$ 2,600.00
Vaccination:   N$ 1,000.00
Water:    N$ 2,400 .00
Total production costs    N$ 36,400.00

This is again about half or 50% of the income from sale of goats.
    Income from sales         N$ 72,000.00
Less:    Direct production costs – 50%    -    N$ 36,400.00 
            Surplus for goat enterprise         N$ 35,600.00    
As previously stated, the norm of reinvesting half the income (50%) into the enterprise is reflected in this scenario as well. 

Can you now summarise the income and costs of the two production enterprises you discussed? 
Income form sales    cattle    goats:
    53    3000    159000    120    600    72000
Production costs:        50    79300        51%     36400
Lick:    48000            6400        
Parasite control:   6300            2600        
Vaccination:    1000            1000        
Water:    6000            2400        
Labour:    18000            24000        
Surplus:            79700            35600
                        115300

The combined surplus is N$ 115, 300, thus close to the N$ 120,000.00 as mentioned in the beginning.
This translates to monthly net earnings of N$ 10,000.00, similar to a middle-income job and that is what you can earn from a farm of 1,500 ha in central Namibia.  This indeed is a lucrative business to be engaged in, especially if considering that the farm provides free housing and you save on daily taxi fees. 

What do you advise a farmer to do with the money earned? 
He/ She can reinvest a minimum of 50% of sales in the livestock enterprise, and in addition meet financial commitments such as repayments of loans, make provision for unforeseen expenses (thus save some money), save for acquisition of quality breeding materials such as bulls and rams, invest some money in the improvement of the farm and what is left over should meet your personal needs and contribute to the improvement of you and your family’s life.  

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