It is important to understand your expected costs and profit based on your system. This will allow you to plan strategically for the coming seasons. Planning ahead is a vital part of any business, and this is especially true for agricultural businesses.

Various factors influence the economics of your goat farm, such as the type of production system, herd composition, marketing and selling. This article explains the influence of each of these factors and provides some suggestions to improve your management skills.

Different production systems

You can keep goats either under intensive conditions, for example in feedlots where you provide all their feed requirements, on pastures (semi-intensive systems) or you can keep them on natural veld under extensive conditions. Different systems have different management requirements and different costs.

Herd composition – How to make your herd more commercially viable

Once a farmer has decided to commercialise his goat flock, he will need to take control of the herd composition – how many rams, productive ewes, castrates and so on.

Management must focus on the ultimate marketing goals. For example, if you aim to sell castrated males, you should castrate all male kids early. Females for breeding should be replaced after 4 to 5 years. This means that enough maiden ewes must be kept back to fill the gaps left by culled females.

Understanding the costs, income, and profitability of your business

It is important to understand the potential profitability of your goat business. You need to be able to answer the following questions:

• How many kids will be born each year?
• How many will survive until I can sell them?
• What price will I receive for them?
• What does it cost per year to keep my herd (feed, medicines, labour, et cetera)?
• What goats will I sell each year (age and gender)?

This information will allow you to start calculating how much money your business is likely to make. It depends on you as an individual, and how well you run your goat business. If you have many mortalities, you will not make money. If your costs are very high, you will not make a profit.

Value-adding and marketing

Selling live goats

In Southern Africa, goats are almost exclusively sold live for ceremonial slaughter in African homes. The majority of goats visibly sold in South Africa are imported from Namibia and sold at taxi ranks or at the side of the road. These are generally Boer goats. Large numbers of goats are sold, traded, and bartered between communities, families, and farmers.

The highest value for indigenous goats is placed on wethers of 3 years or older. They are mainly valued for their size. It is generally quite hard to find young ewes (maiden ewes) for sale. Generally, speculators go around the African areas buying a couple of goats from each farmer until they have enough to make up a consignment.

The other important marketing time is around October when Muslims buy goats for Eid. Goat auctions have been tried by the department and have been moderately successful albeit expensive.

The reason for live sales dominating the market

Assume you have an adult goat that weighs 40 kg – you would get 16 kg of meat when you slaughter it (40% dressing percentage). But given current consumer biases, no one will pay more for goat meat than they would pay for beef or mutton.

Consider that during the following periods there is a high demand for live goats:

• March/April – Easter weekend
• June – Eastern Cape (slaughter of goats for circumcision ceremonies)
• November – Muslim market
• December – Christmas market

Demand for different colours

Breeding for colours has become a popular pastime for stud breeders of indigenous goats. Currently dappled and spotted goats are popular. You can greatly increase the value of goats by breeding in these colours. The popularity and peculiarity of these colours are often trend-driven and can change quite rapidly over time. There are also colour biases among African buyers, and these should be checked and understood in each locality.

Selling live goats in large numbers at auctions

If a number of farmers can agree to sell goats as a group, they can reach a critical mass where they can start controlling the marketing of these goats. This is usually done through auctions or sales days. Auctions can be a particularly useful tool to set the price for goats and sell a large number of goats at market prices within a short time.

For an auction to be successful these are points to consider:

• Communities must be mobilised because auctions need to be strategically timed to occur when buyers will need goats.
• If they are marketed for meat (cull females and wethers), the best time for selling would be around November.
• If they are for breeding stock (rams and maiden ewes), the best time would be in March when they are looking their best.
• There needs to be a critical mass of goats per auction (approximately 400 to 600). If too few, buyers will not be bothered to attend, and costs may be too high.
• There needs to be a critical mass of buyers (10 to 20), or else the prices will be low as the buyers will not compete or will buy what they need and leave early.
• At all auctions, a percentage (known as the agent’s fee) goes to the auctioneer (usually 8%). This fee is either retained to pay for the auction or is split with the organisation (farmers’ association) that organised the auction.
• Sometimes farmers who are not members of the association can present goats at the auction, but these are auctioned last and as a result can sell for lower prices.
• Animals need to be tattooed for identification. They must also be treated for worms and ticks before the auction, and the seller must provide proof of ownership.
• Farmers need to agree on a minimum selling price beforehand with the auctioneers, or else prices may not be acceptable to the farmers and they will lose money.
• The Livestock Anti-theft Unit must be informed of the sale and preferably be present.
• The post-auction process needs to be well organised so that farmers can get paid or take their unsold goats back home without getting mixed up.
• Advertising for the auction must be done well in advance so that buyers from further away can plan to attend.

Options for financing auctions:

Subsidised auction

They can be paid for/subsidised externally by the state or NGOs. Here an entity separate from the livestock association or farmer group carries the cost of the process and infrastructure.

Private or industry paid auction

This is the more common type. The farmers’ association or similar structure pays the auctioneer to hold the auction. In addition, the auctioneers charge a fee per animal sold (often 8%). If a minimum number of good quality animals is guaranteed, the auctioneers may not charge the livestock association anything, and will make sufficient profit from the commission charged.

What this means is that, beyond the advertising costs listed below, with at least 400 goats sold and 8% commission collected, the auction should not cost the farmers anything more.

Items that need to be considered as costs for auctions:

• Advertising and informing buyers – this is being done by the auctioneer through appropriate newspapers and other publications. A text message system is commonly used to inform buyers who have a relationship or history with the auctioneer. Advertising in national media outlets can be costly, but the results of advertising in ProAgri far outweigh the cost.
• Informing sellers – this is done by the livestock association.
• Sale pens – there is a need for gates that can be erected in a way that goats can be kept in separate lots, channelled to the auction arena, and then kept in separate groups belonging to different buyers. Access to a loading ramp facilitates the loading of goats after the auction.
• Staff – to mark each goat coming in, check that ownership is legitimate and agree on conditions of sale, to hold and control the goats in lots, feed and water them, and to separate and hold them for buyers.
• Food and water – for the goats.
• Financial systems – to allow transfer of money between buyers and sellers. It is preferable if sellers are paid electronically by the buyer, but options for paying with a cheque or cash may also be required. Cash liquidity is a requirement.
• Security.
• Auctioneers – to conduct the auction.
• Transport – to transport goats to the auction and if unsold, to transport them back home.
• Tent and stands/seats for buyers – permanent structures can cut these costs.

Informal roadside sales

Informal sales are an alternative to formal auctions.

Advantages

• There is no organising
• The seller agrees on the price with the buyer.

Disadvantages

• There is no assurance for the buyer that the goats are not going to be stolen.
• Sellers are not always informed of what their goats are worth, so often a local speculator can abuse the pricing.
• The health of the animal cannot be guaranteed.
• Farmers often sell at times when they need money, so they may be more likely to take a lower price for the sake of obtaining quick cash.

The information in this article is credited to Mdukatshani, Heifer International South Africa and the KwaZulu-Natal Department of Agriculture and Rural Development who published the Goat Production Handbook in 2015.