Economic analysis of Tanzanian long fat-tailed sheep with different ages at entry to the feedlot and level of molasses concentrate diet

E J M Shirima, L A Mtenga*, A E Kimambo*, G H Laswai*, D M Mgheni*, D E Mushi*, D S Shija* and J G Safari**

Ministry of Livestock and Fisheries Development, P.O. Box 9152, Dar-es-Salaam, Tanzania
shirimamussa@yahoo.co.uk
* Department of Animal Science and Production, Sokoine University of Agriculture, P.O. Box 3004, Morogoro, Tanzania
** Institute of Rural Development and Planning, P.O. Box 138, Dodoma, Tanzania

Abstract

An experiment was carried out to evaluate the profitability of feeding different levels of molasses based concentrate diet (LCD) and age entry to feedlot (AEF) to 120 Tanzanian long fat-tailed castrate sheep under feedlot conditions  at Kongwa Pasture Research Centre, Tanzania. There were four age at entry in feedlot points namely entry at  9, 12, 15 and 18 months, treatments designated as AEF9, AEF12, AEF15 and AEF18, respectively  and  three levels of LCD of 50%, 75% and 100%, treatments designated as  LCD50, LCD75 and LCD100, respectively in 4x3 factorial experiment. The  LCD100  represents ad libitum  concentrate intake with 10% refusal while LCD50 and LCD75 was feeding levels of LCD100.  Feed intake and refusal were recorded every morning while live body weight recorded every fortnightly for determination of daily gain (ADG) for 84 experimental days.  Final slaughter weight (FSW) and selling price of feeder animals were recorded before slaughter. Forty castrates  (10 from each AEF group) were slaughtered immediately for baseline data collection. At slaughter, hot carcass and non-carcass parts  were weighed and their total revenue (TR) was recorded. All the variable costs (TVC), fixed costs and break-even analysis were computed for economic analysis of the feedlot enterprise. 

The hay dry matter intake decreased with increasing levels of concentrate diet while the daily weight gain was significantly increased with increasing levels of concentrate diet. The highest daily gain of 94.3 g/day was observed under LCD100. The proportion of carcass weight (as % FSW) increased from 39 to 42% while that of non-carcass parts (as % FSW) decreased from 39 to 35% as the AEF increased. Feeder animals form 50 to 55% of the total variable costs while feeds accounted for 29 to 38% of all the total costs incurred in the feedlot operation. As the AEF increased, the contribution of the total revenue  from the carcass part increased from 78 to 82% while non-carcass parts  decreased up to 20%. Similarly, the cost of gain decreased from 0.64 to 0.26 (USD/kg carcass gain) from LCD50 to LCD100, respectively. The interaction of AEF and LCD were the source of variation in variable costs and total revenue. It is concluded that feedlot of Tanzanian long fat-tailed when aged 15 months and fed concentrate diet at 75% ad libitum level  and above is profitable as it is a point where greatest  daily weight gain, highest break-even weight gain and lowest break-even cost of gain is achieved.   

Key words: break-even point, carcass yield, fat-tailed sheep, non-carcass parts, profitability

Introduction

Indigenous sheep breeds in Tanzania including Tanzanian long fat-tailed (TLS) strain are well adaptable to the use of local climatic conditions and they are widely distributed in semi-arid and arid regions in the country where agro-pastoralists and pastoralists production systems are dominant. Under pastoral system, there are no fattening strategies, rather the TLS are managed extensively where they experience a long period of feed scarcity (Shirima 2005). This type of management system might render the activity less economical (Msanga 2000). Despite the fact that 90% of the Tanzanian economy depend on agriculture, crop residues and  agro-industrial by-products such as cereal brans, oilseed cakes and sugar cane-based by-products are not fully utilized to increase livestock productivity in the country (MLDF 2008).  One of the alternatives to address this problem is to develop feedlot system  using available indigenous breeds of sheep and agro-byproducts. These resources  are relatively available and non-competitive with human needs in the country (Preston and Leng 2007).

Daily live weight gains, production efficiency and cost reductions  are the major factors affecting the profitability of  feedlot enterprises (Yidirim  2006). Production efficiency is determined by  fattening period, type and amount of feed and age at entry to feedlot.  Biologically, these factors determine the amount of   carcass and non-carcass parts(such as head, hocks, skin and offals production (Santos et al 2008). On the other hand,   saleable carcass and non-carcass parts  determine the amount of  cash from the feedlotted animals, hence their yield is crucial for increasing  the overall farm income (Malope et al 2007).  The non-carcass parts  form 30-35% of the total live body weight in sheep and have  much influence on dressing percentage  (Safari et al 2011). Consequently, the increase or decrease of non-carcass parts is inversely proportional to the yield of carcass part (Sen et al  2011, Suliman and Babiker 2007).

In this study, manipulating the age at entry to feedlot and levels of concentrate diet  for profitable mutton production was aimed. The hypothesis was that the TLS would have higher 1 kg   live weight gain per animal, less production costs per 1 kg live weight gain and thus higher economical and financial profitability rates under feedlot conditions compared to those managed under extensive systems. This is based on the facts that the choice of age at entry to feedlot, type and amount of feed offered determines  growth performance, meat yield and quality (Pasha 2006). Sultana et al (2010) reported that after certain  age, growth rate of sheep is reduced, which is not economical for fattening.  With this scenario.  increasing age entry to feedlot means more deposition of intra muscular connective tissues in the carcass, which in turn reduce tenderness of meat  (Nishimura et al 2010; Santos et al 2008) and  might also reduce  eating quality   and  price of meat.  On the other hand, excessive levels of concentrate offer may lead to excessive  carcass fatness (Nishimura 2010).  However, there must be an economical level of using concentrates as the feeds contributes over 30% of the total variable costs in most of the fattening enterprises (Malope et al 2007). Also, decreasing age to enter feedlot and dietary levels, may results into  longer period of fattening the sheep, lower their carcass weights and possibly greater production of non-carcass parts which are less priced (Sultana et al 2010, van der Westhuizen 2010).

Despite the potential of age at entry to feedlot and levels of concentrate offer on mutton production, there is limited information on  the economy of fattening  indigenous sheep in Tanzania using the available feed resources. Few cases have been reported in Tanzania where livestock keepers often fatten  one to three numbers of sheep and goats  using supplementary feeding obtained from either surplus grains or household food left over (Mushi 2004).These animals are sold   during feasts and holidays when prices are relatively high. Even in countries where sheep feedlot is practiced, there is scarce research data on the economic analysis at which age to enter feedlot or diet to be used in the feedlot for profitable mutton production (Kosgey 2008). Hence, there is need to establish cost-benefit and  researchable intervention  on an appropriate age and diet for fattening indigenous sheep. The objectives of the present study is therefore to undertake economic analysis of  fattening Tanzanian long fat-tailed sheep using different age at entry to feedlot  and levels of concentrate diets.

Materials and methods

Location of the study 

The feeding trial was conducted at Kongwa Pasture Research Centre  and animals slaughtered at Dodoma Modern Abattoir, both in Dodoma region in central Tanzania (36^o30’E, 6^o20’S) at  an attitude of 1100 m above sea level.  Dodoma region is a semi-arid area with average annual rainfall of 550 mm and minimum and maximum temperatures of 13.8^oC and 30.2^oC, respectively.  

Animals and their  management   

One hundred and sixty castrated Tanzanian long fat-tailed sheep  (aged 9, 12, 15 and 18 months with 14.2±1.23, 17.9±2.01, 20.4±2.15and 25.1±3.22 kg  respectively) were used in the 84 days feedlot experiment which was preceded by an adaptation period of 14 days. Before being subjected to feedlot trial, a batch of 40 animals (10 from each age group) was slaughtered for baseline data collection.  The animals were purchased from some farmers in Kongwa district and tracked to  Kongwa Pasture Research Centre.  The age of sheep was estimated based on their stage of the  incisor teeth e according to the method developed by Owen et al. (1977) and records from farmer’s memory. The experimental  animals (n=120) were treated with ivermectin (Kelamectin®) and sprayed with acaricide (Paranex EC®) for control of endo-parasites and ecto-parasites, respectively.  The animals were then grouped into four AEF of 9 (AEF9), 12 (AEF12), 15 (AEF15) and 18 (AEF18) months old and weighed before being offered experimental diet to obtain initial live weight (LW1). Each group consisted of 30 comparable animals which were then randomly assigned to each of the three levels of  molasses-concentrate diet (LCD)   of 50% , 75% and 100% of ad libitum access designated as LCD50, LCD75 and LCD100, respectively. The design was a 4 x 3 factorial arrangement in a completely randomized design.  

Feeds and feeding  

Cenchrus ciliaris grass hay was used as a basal diet and offered ad libitum to each sheep. Hay was manually chopped to a maximum of 10  cm long before offered. The molasses-based concentrate diet, that was composed of maize bran (15.5 %), rice polish (4.5 %), molasses (66.3 %), cotton seed cake (11.5 %), urea (1.6%), minerals mixture (0.4%) and lime (0.1%), was offered in a separate container.  The amount of  hay and concentrate offered  was adjusted until when the refusals reached  about 10 % of the amount offered and maintained for 7 days then it was adjusted to  50, 75 and 100% levels to each respective treatment group. The amount of feed offered was changed every fortnight to match each respective  group on  LCD100. Clean water was provided ad libitum throughout the experimental period. Hay and concentrate offered and refusals were weighed every morning to derive feed intake.  

Growth, carcass and non-carcass parts measurements  

Animals were weighed every fortnight to obtain live body weight (LW) for determination of growth rate. This was done in the morning before being offered feed or water throughout the experimental period. Final slaughter weight (FSW) was obtained by averaging LW records in the last three consecutive days of experimentation period. The average daily gain (ADG g/day) was obtained by the difference between FSW (kg) and LW1 (kg) divided by number of days in feedlot (84). Similarly, feed conversion ratio (FCR) was calculated by dividing the total quantity of  feed consumed (kg DM) in 84 days period by live-weight gained in the same period.  Before slaughter, the animals were kept at the lairage for 16 hours without food but with free access to water. Hot carcass weight (HCW) and  non-carcass parts (gastro intestinal tract – GIT, pluck, tail fat, internal fats, skin, head and hocks) were separated and weighed when hot within 1hr post mortem.  The GIT was weighed while full (GIT full) and after emptied (GIT empty) and stomach content or GIT fill.   

Profitability analysis 

Five cost elements namely total revenue, total variable costs, gross margin, fixed cost and total costs analyses were used to compute profitability of the feedlot trial as advised by Malope et al (2007) as follows:  

i)     Total revenue (TR)

 The TR obtained from selling carcass and non-carcass parts (skin, head, hocks, empty gastro-intestinal tract and internal fats) from an individual animal was used to calculate TR for a particular animal under each respective treatment. Only the right half carcasses and whole non-carcass parts were sold directly at the abattoir within 6 hours post mortem. The left half carcasses were not sold as they were stored in a chill room at 4^oC for other measurements. Therefore, the TR obtained from carcass sales was doubled and added to that obtained from the sale of non-carcass parts to obtain the estimated TR of the whole animal. The TR was thus calculated using the following formula: 

where TR= Total revenue Qrc = Quantity of the right hand side carcass Prc = Price of the right hand side carcass Qnc = Quantity of non-carcass parts Pnc = Price of non-carcass parts n= Total number of sheep involved

ii)     Total Variable Cost (TVC) 

Total variable cost (TVC) was calculated based on the price of producing one kilogram of quality mutton on USD. The variable cost items include purchase cost of feeder sheep feed, medication, labour of feeding the animals and transport to meat processing plant

The TVC was calculated as:

Where TVC= Total variable costs Q1 = Quantity of respective input P1 = Price per unit cost of the input n= Total number of inputs involved

Purchase cost of feeder sheep (castrates)

The prices of sheep which were directly paid to farmers were considered as the purchase costs for the feeders. These were negotiable depending on the age, body condition and actual size of the animals as there were no weighing scales. The prices ranged from USD 9.5 to 12.5 per head. 

Feed, medication and transportation costs

The feed ingredients and veterinary drugs were purchased from local suppliers in Dodoma municipality while molasses was purchased directly from Mtibwa sugar processing industry. Molasses which formed the largest proportion (66%) of the concentrate diet was sold at a gate price of USD 0.02 per kg (wet basis) excluding transportation. The hay used was purchased from Kongwa (USD 0.03 per kg fresh weight).  Transportation costs included in this analysis were those used in collection of molasses, feed ingredients and costs of transporting finished castrates to Dodoma abattoir (60 km from project site) which was estimated at USD 1.25 per animal.  

Labour 

The casual labourers were paid monthly wage of USD 56.3, equivalent to USD 1.88 per day.  The abattoir fee of USD 1.56 per slaughtered animal was added in the labour component.  

iii)     Gross margin (GM)

Gross margin (GM) is the difference between the total revenue (TR) of the enterprise and the total variable costs (TVC) incurred during production of services. Hence, the GM = TR – TVC. In this study, the GM for feedlot enterprise was based on selling prices and cost of raising one kilogram of mutton as advised by Cevger et al (2003). Thus, the GM was calculated from the sale of different carcass and non-carcass parts obtained from animals slaughtered per each treatment and then divided by 30 to obtain GM per head in each respective treatment.  

iv)     Fixed costs (FC)

The depreciation charge was under fixed costs and it was calculated from the estimated value of the building used in feedlotting experiment which was approximately USD 10,000 the method used was the straight-line method assuming a 10% salvage value and useful life of ten years. The annual depreciation was then adjusted to the 84 days feeding period and amounted to USD 1.92 per animal. The depreciation charge of other items like feeding and watering troughs was negligible within the experimental days.  

v)     Total costs (TC)

This was also computed from the sum of total variable costs (TVC) and fixed costs (FC) from each respective treatment, then divided by 30 for a single sheep as follows:

where TC= Total costs Q1 = Quantity of respective input X1 = Price per unit cost of the input n= Total number of inputs involved

Break-even point (BEP)

The break-even point is the point at which cost or expenses and revenue are equal assuming that there is no net loss or gain.  It is a point where a profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted expected return. In this case, BEP was used to determine the maximum prices one should pay for inputs and the minimum prices for output and amount of output (live animals or carcass) in order for profit to be zero under a prevailing cost structure. Therefore, the break-even point is realized when total cost are equal to total revenue (TC=TR). Using this scenario, the following break-even point elements were derived from break-even analysis according to Boyles et al (2004): 

i)     Break-even level of output (BLO) 

The BLO is the minimum number of animals to keep in a feedlot in order to obtain zero profit and was calculated using the following equation (1):

BLO= TFC/ (P-VC) …………… (1)

where         

           BLO = break-even level of output

            TFC = total fixed costs

              P = unit price of fattened sheep    at the end of project             

             VC = variable costs incurred  to fattened a single animal/sheep

 ii)     Break-even selling price (BSP)

Break-even selling price (BSP) is the average price at which each animal should be sold in order for profit to be zero. The BSP was calculated using the following equation (2): 

BSP = [(IBW*PP) + (WG*CG)]/FBW…..(2)

where

    BSP = break-even  selling price,

    IBW = initial body weight,

    PP = purchase price  per kg LW of the animals entering the feedlot programme,     

    WG = weight gained during the feedlot period,

    CG = cost of gain per kg live weight of the animal entering the feedlot programme,

    FBW = final body weight of the animals at the end of the feedlot programme.

 iii)     Break-even purchase price (BPP)

Break-even purchase price (BPP) is the price at which the feeder animal should be bought in order for profit to be zero. The BPP was calculated using the following equation (3): 

BPP= [(SP*FBW)-(WG*CG)]/IBW ………… (3)

Where:      BPP = break-even purchase price while other variables (SP, FBW, WG, CG and IBW) are

               defined as before.

iv)     Break-even weight gain (BWG)

Break-even weight gain (BWG) is essentially the amount of gain that is required for the total costs of that gain to be exactly equal to the total revenue derived from the gain. Thus it is calculated from the following equation (4): 

BWG= [(SP*FBW)-(IBW*PP)]/CG ………. (4)

where

 BWG = break-even weight gain and other variables (SP, FBW, IBW, PP and CG) are defined as before. 

v)     Break-even cost of gain (BCG)

Break-even cost of gain (BCG) is defined as the maximum cost of gain that is required for profit to be zero and calculated using the following equation (5): 

BCG= [(SP*FBW)-(IBW*PP)]/WG or BCG= BWG/WG …………(5)

   where

      BCG = break-even cost of gain and other variables (SP, FBW, IBW, PP, WG, and BWG)  

                  defined as before.

 vi)      Break-even final weight (BEFW)

Break-even final weigh (BEFW) is the minimum weight at which to sell the animals for a break-even point and calculated as equation (6):

BEWF= [(IBW*PP) + (WG*CG)] …… (6)

     where

       BEWF = break-even final weight and other variables (IBW, PP, WG and CG) are defined as before

Statistical analysis 

Data were analyzed using the General Linear Model procedure of SAS (2001). Different age entries to feedlot and levels of concentrate and their interactions were considered as fixed effects and tested against residual mean square in a model adjusted by covariance analyses for differences in the appropriate covariate. For all analyses, when least square means were significantly different at P<0.05, they were separated by Least Significant Difference test.  

Results and discussion

Feed intake and growth performance 

The decreased hay dry matter intake with increasing levels of concentrate diet is associated with live body weight of the animals (Table 1). Also, the average daily gain (ADG) increased with increasing levels of concentrate diet and possibly caused by higher feed conversion ratio (FCR). The highest ADG of 94.3 g/day was observed under 100% level of concentrate diet. This might probably associated with higher energy and protein supplied by the concentrate diet which enhances fibrous digestibility and ultimate increase of daily gain. Safari et al (2011) reported an increase of dry matter intake and higher ADG in Red Maasai sheep fed urea treated straw (higher energy and protein levels) as compared to untreated straw (lower energy and protein level). The observed ADGs in the present study was almost four times more than that of 21g/day reported by FAO (1999) to the indigenous sheep  under extensive grazing and within the observations made from various indigenous sheep studies in Tanzania (Safari et al 2011, Shirima et al 2012). The interaction of AEF and LCD were the source of variation of   dry matter intake in which as the level of concentrate increased, the level of hay intake decreased.

Carcass characteristics 

Table 2 showed that changing age entry from 9 and 18 months increased hot carcass weight (HCW) by   almost 69% while changing dietary levels from 50 to 100% increased HCW only 34%.  This implies that, the influence age is higher than that of concentrate in HCW.   The increase of weight in carcass weight with increasing age of the animals and amount of concentrate offered can be attributed to increased carcass fatness and muscle mass resulted from increased energy and protein intakes. The current results support findings by Sen et al (2011) that higher energy feed have positive effect on growth rate and excess fattening in sheep. There was no significant interaction (P>0.05) effects between age entry and dietary levels on most of the carcass traits observed in this study.  

Profitability analysis 

The prices for input, output and depreciation charges per head of animal in Table 3 were used to compute variable costs in Table 4. Feeder animals form a major part of the total variable costs (TVC) followed by feed costs. Feeder animal costs accounted for 50 to 55% of the TVC and increased with increasing age at entry to feedlot. This range is caused by the differences in body sizes and amount of diet consumed per body weight of the animals entering in the feedlot. The age entry x dietary levels were the source of variation in the cost of hay and concentrate as there was also an inverse proportional of hay and concentrate intakes as the age and dietary levels increased. The costs of feeds (hay and concentrate) accounted for 14 – 17% of the TVC and increased with increasing age at entry and level of concentrate diet offer. When the cost of feeder animals was excluded, the cost of feeds accounted for 29 to 38% of the total variable costs.  The current findings are contrary to those reported by Malope et al (2007) who observed the cost of feeder animals and feed to contribute over 92% of the total feedlot business in Botswana.

Revenue from different sales 

The carcass parts accounted 78 to 82% of the total revenue (TR) while the non-carcass parts accounted to 17 to 22% of the TR (Table 5). The TR from carcass sales increased while that of non-carcass parts decreased as the AEF and LCD increased. The decrease of TR from the non-carcass parts is due the decrease of their yield (proportion to the slaughter weight) throughout the production period in the feedlot. The decrease weight of some non-carcass parts including head, hocks and GIT as the animal matured can be explained by the sequence of animal development as these organs matured earlier due to their functional needs (Lawrie 1998). This can be seen as a major advantage to producers in  feedlot regimes because more nutrients obtained from diet is used for growth of higher priced edible tissue  or  carcass parts  rather than the non-carcass parts (fifth quarter)  which are less priced. The current study also showed that the interaction of AEF and LCD were the source of variation in variable costs, non-carcass parts and total revenue. These variables are associated with the increase of variable costs while there was a decreased of revenue from the non-carcass parts as the animal matured. In general, there is high profitability from the carcass parts sale than non-carcass parts sale in all the treatments measured.

Partial budget analysis 

The partial budget analysis revealed that the overall revenue and net farm income increased with increasing age at entry to feedlot and levels of concentrate diet (Table 6). This implies that feedlot fattening is profitable above 15 months age at entry (USD 12.5) and any concentrate offer above 75%. Also, the results showed that even if the animals are not subjected to feedlot finishing, yet the net income (USD 11.0) which is above the animals offered 50% level of concentrate diet (USD 6.09).  Similarly, the cost of gain (USD/kg carcass gain) decreased by 59.4% from USD 0.64 to 0.26 when treatment changed from LCD50 to LCD100, respectively. Our results are partly  in agreements with those observed by  Yirga  et al (2011) who observed better biologic and  economic performance from supplemented than unsupplemented  Hararghe Highland sheep in Ethiopia.

Break-even analysis on the level of output 

The break-even level of output (BLO), which is the minimum number of animals to keep in a feedlot in order to obtain zero profit decreased with the increasing the age at entry to feedlot (Table 7).  Our results shows that only 8 animals (greater than 18 AEF) compared to 20 animals (less than 9AEF) are needed to break-even. This implies that, in order to break-even, selection for older animals probably with higher initial weight is required. Also, the results indicated that, with 100% ad libitum of concentrate offer few castrates almost fifty percent (<11) compared to many castrates (>20) of comparable age and weight are needed to break-even. These findings are in agreement with those reported by Cevger et al (2003) who recommended selection of animals with higher initial live weight for higher economical values with exception of daily gain. When concentrate diet offered at 100% level of ad libitum, fewer animals will be required to break the even, possibly due to the increase of amount of saleable carcass for higher premium than non-carcass parts. On the other hand, if the animals are put in feedlot when they are 15 months old and above, the highest break-even weight gain (BWG) of 1.04 kg will be achieved. Malope et al (2007) reported that in any feedlot enterprise, daily weight gain is an important indicator of profitability as it determines the number of days in feedlot and overall cost of fattening. Also, the break-even final weight (BEFW) increased with increased age at entry to feedlot with the highest (27 kg) at 18 months age at entry to feedlot. Final slaughter weight also determines higher retail cuts, which means more profit from a larger carcass (Shapiro 1994).