Spell out the specifics in sheep share arrangements
May 25, 2012
Like other segments of agriculture, the sheep industry seeks ways to continue its business in the future. Because the amount of capital needed to enter the sheep business can be prohibitive for many young producers, a solution some are experimenting with are share agreements.
According to David Ollila, South Dakota State University (SDSU) extension sheep field specialist, young producers seek out producers nearing retirement age to help them get started in the sheep business. If the two can pair up and develop a suitable arrangement, many times the young producer can obtain a flock on shares, Ollila said.
“We are seeing more interest in sheep share arrangements as our producers are getting older and looking for someone to take over,” he said. “Many of them don’t have family members to take over, so they are looking for younger producers who want to be involved in the sheep business with the older generation serving as their mentors.”
Share arrangements can vary depending upon what each producer brings to the table, Ollila continued. Producers can determine percentages based on the lamb and wool crops produced.
A common scenario is where the older producer supplies everything except labor. Ollila figures the arrangement is worth a 15-25 percent return for the newcomer.
“But I encourage producers to do some profit sharing on anything above that to reward them for better management and labor,” he said.
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It is also common to see situations where the older producer supplies livestock, and the producer taking the sheep on shares provides everything else. In that situation, the share arrangement would be closer to 60-70 percent for the person taking the sheep on shares, Ollila said.
“I would start with the owner producer getting a 75 percent share of the crop, up to 100 percent of the lamb crop, and the share producer getting 25 percent. That would flip-flop on anything above a 100 percent lamb crop,” said Reid Redden, North Dakota State University (NDSU) extension sheep specialist. “I think it would benefit both parties, because it would provide a lot of motivation to keep that lamb crop percentage high, and keep a lot of lambs alive because for the share producer, their percent gross above 100 percent triples.”
For the producer considering a share arrangement, Ollila encourages them to evaluate the other person’s background, knowledge of and experience with sheep; the support system and availability of mentors; facilities; and sheep health program protocols.
“I would also make sure they understand what it takes to manage sheep, and have all these things identified within a contract,” added Redden.
“I would be very hesitant about leasing my ewes out to someone unless they have a lot of background knowledge with sheep because they can be more difficult to manage at times, especially at lambing, and controlling predation,” he said. “These two things can have a tremendous impact on the percentage of the lamb crop.
“There are two sides to these arrangements,” Ollila stated. “When considering a share arrangement, the owner of the sheep typically has a good, solid, uniform group of highly productive ewes, and they didn’t get that way by accident,” he explained. “He will want to make sure that if he puts those ewes out on shares, that when the arrangement ends he is getting those sheep back.
“An older producer will be worried about finding someone who won’t hurt the flock he has developed,” Ollila summarized. “If you know what your ewes can do, you should also have an expectation of what another producer should be able to do with those ewes based on his facilities, education and management.”
Conversely, someone interested in taking sheep on shares needs to look at the producer – how he has previously managed the flock; the genetic potential of the ewes; and their lambing history. “A young producer needs to be looking for a good, healthy herd from a producer with good records of what those ewes are able to do,” Ollila said.
In range areas, Ollila said it is common practice for producers to have Rambouillet-based ewes that typically produce a 120 percent lamb crop and high-quality wool. White-face ewes can develop higher quality wool because they live in cleaner conditions where they aren’t consuming hay and other feeds that become entangled in the fleece.
“Their diet on the range gives them the opportunity to develop finer, high-quality wool,” he said. “They also have excellent longevity and tend to live longer than their counterparts.”
In farm flock areas, producers tend to breed white-face ewes to black-face rams for hybrid vigor. Those speckled-face ewes become the base of the flock, and they are then bred back to black-face rams.
“Those crossbred ewes will raise some fast-growing, healthy lambs,” he said. “They will sacrifice wool quality, but the ewes have more multiples and can produce upwards of a 200 percent lamb crop.
“Both sides will have to evaluate the facilities and land available to determine what type of share arrangement will work best,” he said. No matter what type of arrangement producers agree upon, Ollila encourages both sides to do their research and be prepared.
“Any time you enter into those agreements, a lot of research will cost you very little,” he said. “I also tell producers to make sure everything is in writing. There are extension personnel very familiar with sheep and how these arrangements work, who are available to help producers work out share agreements.”
Editor’s note: For more information, contact Ollila at 605-569-0224 or Redden at 701-231-5597.