Profitable Swedish lamb production by economies of scale

Economic sustainability assumes profitability (revenues >= costs including annual cash expenses as well as family labor and investments). Calculations Suggest that sheep flocks of more than 500 ewes can be profitable under Swedish conditions whereas smaller flocks are unprofitable unless they are managed by cheap existing resources including buildings, fences, machinery and family labor with low or no opportunity costs. Despite these economies of scale less than 1% of the Swedish sheep flocks have 500 or more ewes. Possible reasons are, according to interviews with lamb producers which have built up for Swedish conditions large sheep flocks of 90-900 ewes (average 380), growth sacrifices when developing large flocks and lack of accessible cheap land for providing large flocks with pasture and winter forage. The growth sacrifices reducing revenues or increasing costs during or immediately after the growth period include low production of primiparous ewes, reclamation of additional land and capital costs of new buildings before the Hock has been expanded to the intended number. The cash-flow is another problem for expanding sheep operations. Profitable lamb production presupposes large areas of land with zero or low opportunity costs. In fertile flatlands the opportunity costs are too high and in forest-dominated regions it is difficult to get hold of large enough areas near the farm centre for pasture and winter feed production. The latter problem can be solved by leasing cheap land further away and transporting feed and grazing animals, and by extending present pastures by incorporating adjacent overgrown pastures, marginal arable land and forest land. Another requirement for long-term profitable lamb production is to reduce the costs of new sheep sheds below what is a common cost level in Sweden. (C) 2008 Elsevier B.V. All rights reserved.