Preface
Our recent Meat Goat Industry Update article in the April 2006 issue of Goat Rancher confirms the fact that domestic meat goat production is, and has been for a decade, insufficient to meet consumer demand. Some 40% of current consumption is filled with imported frozen goat meat from Australia and New Zealand (equivalent to 600,000 or so 35 lb carcasses). In 2005, the Philadelphia Port of Entry received 44% of these imports for distribution throughout Northeastern metropolitan areas.

Even with premium retail prices, fresh-chilled domestic goat meat is preferred over imported meat. To meet this demand, there have been recent, substantial increases in goat production in the northeastern and adjacent states, but thousands more are needed; in 2005, NJ/NY/PA slaughtered over 280,000 head.

Supply is the problem, not demand; opportunities to initiate or expand production are indeed real, but, as always, there are restraints to expansion.

Introduction
The paramount obstacle to increasing Northeastern goat numbers (and elsewhere) is enterprise profitability. It is the purpose of this paper to describe the essential factors affecting the profitability of meat goat enterprises and, secondly, to describe certain opportunities for achieving improved profitability.

There are a number of traditional ways to undertake partial or complete business enterprise analyses. For goat producers, we have found that calculations to determine their break-even price/lb (BEP) of slaughter kids can provide valuable information about both production and economic concerns. Obviously, the difference between the BEP/lb and the selling prices/lb is the margin of profit/lb and per head. In the aggregate, these margins constitute enterprise profitability.

Three crucial figures are needed to calculate BEP. First, we need to calculate the percent of kid crop weaned (not just born). To do this, we divide the total number of kids weaned (both sexes) by the number of does exposed (not the number of does actually kidding).

For example, if 100 does were exposed and they together weaned 150 kids, the percent kid crop weaned would be 150. (In the real world, nearly all of the does would cycle and most would conceive and perhaps 90 or so would kid and product X number of kids, Y of which would survive until weaning time).

Secondly, we need to determine the average cost/exposed doe of “maintaining” her for one year. Such costs must by all-inclusive (her feed, any creep-feed for kids, health costs, breeding fee, “overhead,” depreciation of assets, land-use fee, etc.). In this reckoning, each doe could be viewed as a profit-center, but all the does generate all the income and they bear all the costs.

Thirdly, to accurately determine BEP/lb of the kids sold at weaning time, or shortly thereafter, we must “know” their average selling weight.

The interrelated influences of these three factors/figures on BEP/lb of slaughter kids are shown in Table 1. To illustrate usage of this table, first select an average selling weight, say, 65 lb; then select a weaning rate, say, 150% (1.5 kid/doe/year); then select a doe maintenance cost, say, $70/year.

Follow the 150% kid crop weaned column downward to the 65 lb selling weight section; then, looking left, locate the annual doe-cost line for $70/head. The intersection of this line/column duo shows a figure of $0.72. This is the break-even price/lb, that is, if you sold at this price/lb, you would neither lose nor make money on this goat.

If you sold for a higher price/lb, say $1.22, you would make a profit of $0.50/lb (1.22 – 0.72) or, on the 65 lb kid, $32.50/head (65 x 50 cents). If you sold for less than the $0.72/lb, you would experience a loss/lb and per head. No rocket science here, just basic goat production economics. Readers should be aware that these BEPs reflect an on-farm scales situation, and thus do not account for shrinkage (hauling loss of about 3% of body weight) or any sales fee/head or transportation cost. Such costs may easily total $5 or more.

To illustrate the positive influence of increasing the percent kidding rate on BEP (for a 65 lb goat from a doe whose maintenance cost was $70.00), note the decline in BEP prices as the kidding rate increases from 100% ($1.08) to 200% ($0.54). As the BEP falls across improved kidding rates, profit per doe rises sharply. For example, at 100% kidding rate and a sales price of $1.22/lb, the profit/lb is $0.14 (1.22 – 1.08); consequently, the single kid weighing 65 lb would generate a profit of $9.10 (0.14 x 65).

At a 200% kidding rate; however, the profit is $0.68/lb (1.22 – 0.54), and the profit on the two-goat litter would be $88.40 (0.68 x 130 lb). (Math sharks would check this profit/doe figure thusly: $1.22 x 130 = 158.60 gross – 70.00 cost = 88.60; the 20 cent difference is due to rounding errors.)

To illustrate the positive influence of decreasing annual doe maintenance cost on BEP (for a 65 lb goat), examine the decrease in BEP prices as the doe-cost decreases from $90 ($1.38) to $50/yr ($0.77) at a 100% kidding rate; at 200% rate, the figures are $0.69 and $0.39, respectively. The single, 65 lb kid with a dam maintenance sot of $90 and a BEP of $1.38/lb would, if sold at $1.22/lb, lose $0.16/lb or -$10.40/hd (65 x -0.16). A similar kid from a dam whose maintenance cost was only $50 and had a BEP of $0.77/lb would net $0.45/lb or $29.25/head.

Moreover, at a 200% kidding rate, and using the same calculation scheme, the profit on the two-kid litter from a $90 maintenance doe would b $68.90; from a $50 maintenance doe, the two-kid litter would engender a profit of $107.90. (Again, sharpies could check this profit/do figure by: $1.22 x 130 = 158.60 gross – 50.00 cost = 108.60; the 70 cent difference is due to rounding errors.)

To illustrate the positive influence of increasing the selling weight of a kid at weaning, let us examine the results using, arbitrarily, a $70 doe cost/year and a 150% kidding rate. At 50 lb, the BEP is $0.93; at 65 lb it is $0.72, and 80 lb it is $0.59. Assuming the same $1.22 cents/lb selling price used above, the profit margins are, per lb, $0.29,0.50, and 0.63, respectively, for these sale weights.

In this example, a 50 lb kid would yield a profit of $14.50 (50 x 0.29) x 1.5 kids/litter = $21.75, while a 65 lb kid would yield a profit of $32.50 (65 x 0.50) x 1.5 kids/litter = $48.75; an 80 lb kid would yield a profit of $50.40 (80 x 0.63) x 1.5 kids/litter = $75.60. Third math check: 1.22 x 120 lb – 70 = 76.40; close enough for a Texas Aggie.

Cautionary note: most commercial does cannot wean kids weighing 60 lb or more in 4 months or so unless she and/or the kids receive supplemental feed. In these calculations, the cost of this added feed is included as part of the doe maintenance cost. (Any feed given to kids post-weaning is also treated this way; to do otherwise, would lead to separate post-weaning cost-benefit calculations).

Discussion Points
The foregoing computations describe the economic consequences of reproductive efficiency (number of kids/weaned per doe exposed and their collective weaning/selling weight) and management efficiency (reducing the aggregate cost of maintaining a doe for one year).

It is self-evident that reducing the break-even selling price/lb for market kids is the paramount consideration in managing a commercial slaughter goat herd.

The relative importance to enterprise profitability of the three figures (percent kid crop weaned, doe maintenance cost/year and litter weight) may vary somewhat among herds and venues, but, in any case, all are crucial to enterprise profitability. Remember, slaughter goat production/profitability is, essentially, a numbers game.

To illustrate, within a given herd size, the number of kids weaned/sold per year is more important than individual, or even litter, weaning weights which are, in turn, more important than the “quality” of the kids sold as measured by their live selection grades (currently, the differential paid for #1 over #2 is only two cents/lb or so, with #3s drawing about 10 cents less).

In the introductory section, we used 100 and 200 percent kid crop rates for illustration; are these figures representative? Well, yes and no … many Texas goat owners of extensive-type operations (3-5 acres/doe with somewhat erratic nutrition levels, limited environmental protection, and subjection to about 15% annual kid loss to predators/diseases) would likely consider a 100% weaned kid crop/per exposed breeding age doe to be acceptable; in drought times, 75% or less may be experienced. The better operators, in good rainfall years, would be pleased to achieve 125%, while 150% would be a top expectation, at least for most of them.

Can producers in areas of higher rainfall, more forage/acre, longer growing seasons, warmer winters, etc. expect higher kid crop percentages? Yes, more kids will likely be born and more will likely survive to weaning/sale time (but only if parasite and other problems can be controlled).

The typically small herds in Southeastern states (30-100 does) can, with decent goats and adequate management, usually achieve 150%. With superior forage and parasite management, many could achieve 175%, occasionally even 10-15% more.

Producers in more northern areas should match such figures. (Note: all these percentages are from mixed-age herds – abnormally high numbers of first-timers and old-timers within a given herd will surely lower such figures).

Is a 200% kid crop/per exposed doe achievable? No, not really, not with once/year kidding – for every doe that did not breed (or aborted or abandoned her kids), another doe would have to wean quadruplets or two does would have to wean triplets. Not to say it couldn’t be done, but it would require an unusual confluence of good does, good management, and good luck.

Of course, if an owner decided to undertake an accelerated kidding program (three kid crops in 24 months), he could easily reach a 200% crop/year (by averaging a 133% kid crop across the three kidding waves). If he averaged a 150% rate in such a program, however, he would achieve a 225% kid crop on an annual basis, while averaging a 175% kidding rate would achieve a 262% kid crop. Striving for this latter rate or more might, one images, require a hit of divine intervention or, at a minimum, a considerable faith-based optimism by the striver.

Table 1 provides annual doe-maintenance cost figures from $50 to $90. Are these realistic? I think so, but a lot of West Texas ranchers would argue that they couldn’t stay in business if it cost them $50 a year to “run” a doe. For example, at a kidding rate of 100% and a weaning weight of 50 lb and using the $50/head figure, the BEP/lb is $1.

If the kid sold for $1.25/lb, it would generate a profit/doe of $12.50 (1.25 – 1.00 x 50 = 12.50). After paying a marketing charge of, say, only $2.50/head, the return to labor/management would be $10/doe. (In such a situation, one would need to own/manage about 3,000 does, and have a well-employed (off-farm) and frugal spouse, as well as unusually undemanding children who could – and would – work goats on about 10,000 acres.)

At the other extreme, a $90/doe maintenance cost for corn belt/Northeastern producers does not seem particularly unlikely to me, given the shorter grazing seasons, higher production inputs/costs associated with a doe herd of 100-200 head. But, I don’t find it particularly untenable either.

For example, at this cost and with a kidding rate of 1.5 and selling 65 lb kids, the BEP is $0.92/lb. Selling at $1.25/lb, the profit/doe is $32.18 (33 cents/lb x 65 lb x 1.5 = 32.18).

In this same circumstance, just getting an extra ¼ kid/year (1.75% kidding rate), would raise the profit/doe to $44.85 (1.25 – 0.79 = 0.44 x 65 x 1.5 = 44.85). And, at this same 1.75% kidding rate, but selling 80 lb kids, the profit/doe would be an impressive $84.00 (1.25 – 0.65 = 0.60 x 0.80 x 1.75 = 84.00).

Let us dreamily digress a moment – image you are a New Englander with a hundred does whose maintenance cost is $100/head, but each doe weans/sells two 80 lb kids for $1.50/lb. Such a doe would gross $240 (2 x 80 x 1.5) and net $140 (240 – 100 = 140). Life would be good indeed, but … back to reality.
 

Table 1. Break-even Selling Price per Pound for Kid Goats with Different Kid Crops Weaned, Doe Maintenance Costs, and Kid Selling Weights
Annual Doe Cost, $/hd	Break-even Price, $/lb (rounded to nearest penny)
	Kid Crop Weaned
	100%	125%	150%	175%	200%	225%
	Selling Weight  – 50 lb/hd
50	1.00	0.80	0.67	0.57	0.50	0.44
55	1.10	0.88	0.73	0.63	0.55	0.49
60	1.20	0.96	0.80	0.69	0.60	0.53
65	1.30	1.04	0.87	0.74	0.65	0.58
70	1.40	1.12	0.93	0.80	0.70	0.62
75	1.50	1.20	1.00	0.86	0.75	0.67
80	1.60	1.28	1.07	0.91	0.80	0.71
85	1.70	1.36	1.13	0.97	0.85	0.76
90	1.80	1.44	1.20	1.03	0.90	0.80
	Selling Weight – 65 lb/hd
50	0.77	0.62	0.51	0.44	0.39	0.34
55	0.85	0.68	0.57	0.49	0.43	0.38
60	0.92	0.74	0.61	0.53	0.46	0.41
65	1.00	0.80	0.67	0.57	0.50	0.44
70	1.08	0.86	0.72	0.62	0.54	0.48
75	1.15	0.92	0.77	0.66	0.58	0.51
80	1.23	0.98	0.82	0.70	0.62	0.55
85	1.31	1.05	0.87	0.75	0.66	0.58
90	1.38	1.10	0.92	0.79	0.69	0.61
	Selling Weight – 80 lb/hd
50	0.63	0.50	0.42	0.36	0.32	0.25
55	0.69	0.55	0.46	0.39	0.35	0.31
60	0.75	0.60	0.50	0.43	0.38	0.33
65	0.81	0.65	0.54	0.46	0.41	0.36
70	0.88	0.70	0.59	0.50	0.44	0.39
75	0.94	0.75	0.63	0.54	0.47	0.42
80	1.00	0.80	0.67	0.57	0.50	0.44
85	1.06	0.85	0.71	0.61	0.53	0.47
90	1.13	0.90	0.75	0.65	0.57	0.52

 

 

Reducing Enterprise BEP
There are but two ways to reduce BEP. The first is to improve reproductive efficiency of the doe herd via increasing the percentage kid crop weaned and the little size/weight sold. Proper nutrition, good health status, and adequate general management of the does and bucks are necessary, but may be insufficient conditions to do this. Improving the genetic quality of the breeding herd offers a further opportunity – better mamas do better BEPs.

How to improve reproductive genotype of your herd? Slowly and expensively, that’s how … in the animal world, the heritability of reproductive traits is relatively low: consequently, genetic progress across generations will be slow. Also, there is the practical difficulty of identifying, and affording, bucks (or does) with proven reproductive performances clearly superior to your stock (the greater this difference, or ‘reach’, the quicker you can improve your herd – but, at a price, of course.)

Notice, the key words here are proven and superior; show-ring ribbons, earnest salesmanship, and high prices in no way guarantee more and/or heavier weanlings, nor do University-tested, fast-gaining bucks necessarily improve reproductive traits of their offspring.

Although proper phenotype and adequate sexual behavior are certainly basic considerations, reliable records of daughter performance, over time, are the key to rational selection of herd-sires and replacement does.

The second, and most rapid, way to lower BEP is to reduce the cost of doe maintenance. This reduction may take many forms. For instance, each of the line-items listed under FARM EXPENSES in your IRS Form-1040/Schedule F offers a perspective savings opportunity. Remember, the sum of all these expenses must be divided by the number of exposed breeding age does in a herd to get the annual doe maintenance cost.

Logically, those line-items that demonstrate the largest, recurring outlays offer the best opportunity for making substantial reductions. Unfortunately, it is beyond the limits of this paper to discuss the economics of feeding programs, health care, facilities, vehicles usage, etc. We do, however, call your attention to four figures that seriously impact doe maintenance cost.

The first is the depreciation charge associated with owning a doe kid or yearling ready to breed for slaughter kid production. Our experience suggests that, logically, you should not pay more than the likely sale price of two good 65 lb slaughter kids – currently, 2 x 65 x $1.25 = $162.50 (including all procurement and hauling costs)

We reason thusly: the average commercial doe life is 5 parturitions in about 5 years. Her salvage value as a “cull nanny” might be $72.50 (130 lb x 56 cents/lb); in this case, her depreciation charge (real money gone) would be $90, or $18/year.

Secondly, one must also add the interest charge of $10 (6%/year x $162.50), and thirdly, her “breeding fee.” Suppose you pay $500 for a yearling buck, you keep him for three breeding seasons, and he sells as a slaughter buck for $200. His depreciation cost is thus $100/yr (500-200/3). Add $30/yr for interest; also add, say, $20/yr for feeding/health, etc, for a total of $150/yr. If he covers 50 does/year, the breeding fee is $3 each. So, these three charges alone total $31/doe/year – and you have yet to feed or worm her!

The last charge to annual doe maintenance cost is the land-use fee. If the land is currently being paid for on installment, the interest, taxes, etc, will be part of the annual accounting procedure. But, if the land is paid for, one could (should?) charge fair market “rental value” to get an annual land-use charge. Alternatively, one could calculate an “opportunity-cost” figure (what you could earn on this land if you sold it and invested the proceeds in IOUs).

Careful, this can be a scary exercise indeed; one doe on $1,000/acre land at 4% tax-free would be $40/year. However, if this land could carry 3 does per acre, per-doe cost would be a more tolerable $13 or so. (Contrarily, thousands of Texas goats run on well-over $1,000/acre land requiring 3 acres/goat - $3000 x 4% = $120/doe/year opportunity cost, arrgghh, etc..

On the other hand, perhaps such ranchers – and you, too – could employ the traditional ploy of simply ignoring this charge altogether. Pinkerton did so for years; his devious pseudo-rationalization was that his frugal folks left him the place free and clear. Accordingly, it didn’t cost him anything. Such dubious strategy can notably, if erroneously, improve one’s profit picture, of course. (This is sometimes called the Enron Solution to inconvenient facts).

And, in conclusion, should it cross your mind that a slaughter goat enterprise could actually pay for the cost of the land involved, we suggest you go into a dark room, lie down, put a cool rag on your head, close you eyes, breathe deeply, and wait for this notion to pass…if it doesn’t, you are in precarious need of professional help. Should you proceed, you would be indulging in speculative land appreciation, agricultural tax exemption, whatever, but certainly not commercial goat production.