Scaling Improved Sheep Fattening Practices and Technologies in Ethiopian

Highlands

Sheep Fattening Business Case for Youth Groups

Esayas Mulatu
Jane Wamatu
Dec 2019
Introduction
In close collaboration with Regional Agriculture Research Institutions and partners, ICARDA is scaling out
improved sheep fattening practices and technologies in Ethiopia. The project aims to enhancement
incomes from sheep fattening.
Sheep farming is one of the lucrative commercial businesses in Ethiopia. With basic knowledge on sheep
farming and management, farmers and youth in Ethiopia can be successful in sheep fattening and
generate good revenue from the sector. Rural youths who are unemployed or those with marginal
landholding can engage in sheep farming.
Sheep farming does not require much space and does not destroy trees like goats. With relatively low
investment costs, sheep farming has quick returns as sheep can be sold at the age of 5 to 6 months or can
be fattened within three to four months. Sheep meat has huge demand throughout the country and can
be sold at very high prices during festive seasons.
Despite all potential benefits of sheep fattening, farmers are not getting optimum benefit from the sector.
Youth unemployment is high in Ethiopia and most rural youth do not have access to land for production
of crop and other agricultural outputs.
Therefore, it is important to carry out a cost and return analysis or profitability of sheep fattening as a
means of creating youth employment and ascertaining the profitability of scarce resources used by the
farmers to maximize their profit.

Materials and methods

The Study Area
The study was conducted in Doyogena district, Menz (Gera and Mama) district and Bonga, Kaffa zone
where the sheep fattening project is under implementation. Doyogena is a district found in Kenbata and
Tenbaro zone of SNNPR region, located 268km from the capital city, Addis Ababa. Menz gera and Menz
mama districts are located in North Shewa zone of Amhara region approximately 280 km and 255 km from
Addis Ababa respectively. Bonga is located in Kaffa zone, SNNPR region, 499 km Northwest of Addis
Ababa.

Sources of Data
The study used both primary and secondary data. Primary data which involved the use of questionnaires
and scheduled interviews. Previous studies on the sector and data from different actors were also used
as a source of information. The information gathered includes those on fattening system of the study
areas, socio-economic variables of the fatteners, cost of sheep fattening, including feed, returns on
investment, production constraints and opportunities.
Analytical Techniques
Gross Margin Analysis (Budgeting Techniques): To evaluate profitability of sheep fattening in study area,
budgeting techniques were used. The technique specifically used gross margin analysis through which the
Net Fattening Income was obtained.

GM = GI-TVC…………………………………… (i)
Where: GM = Gross Margin
GI = Goss Income
TVC = Total Variable Cost
NFI = GM-TFC…………………………………… (ii)
Where: NFI = Net Fattening Income
GM = Gross Margin
TFC = Total Fixed Cost

Assumptions
The profitability analysis was conducted based on the following assumption
• Group fattening business
• Each group has 10 members
• Each youth will contribute one sheep to the group and the project will provide additional 10 sheep
for the group with ten members and each group will have 20 sheep for start-up of the business.
Results and discussion
Sheep fattening system in the study area
In Ethiopia livestock production broadly classified into pastoral, agro-pastoral and mixed crop–livestock,
peri-urban and urban production systems (Solomon et al 2010). In pastoral systems, extensive livestock
production is mostly the sole source of livelihood with little or no cropping. In the sub moist/moist
lowlands, agro-pastoralism is the main mode of production. Crop and livestock production are both
important activities. Livestock production is a secondary enterprise in the highland mixed crop–livestock
systems, although livestock assumes a major importance in areas where crop production is unreliable.
Sheep, in the study area are kept under traditional extensive systems, largely produced in mixed crop–
livestock production systems. Sheep production is of subsistence nature. Market-oriented or commercial
production is minimal. Smallholder sheep production is predominant in the highlands because of land and
capital limitations. In the extensive systems, there is minimal purchase of inputs and feeds. In Bonga
district, grazing land devoted to sheep or livestock production is too low and most fatteners manage on
marginal lands. According to Solomon et al (2010), traditionally extensive systems of production share
common characteristics such as limited number of animals per unit area, low productivity per animal,
relatively limited use of improved technology and use of on-farm by-products rather than purchased
inputs.
The major feed resources for sheep raries from area to area. In addition to grazing on communal and
marginal land, farmers in Doyogena district also use wheat straw, desho grass, amicho/enset and potato
(leaves and potato). Farmers in Menz area use faba bean straw, barley straw, wheat straw and bran,
broken lentil, atela, wheat bran and noug cake as supplementary feedd for sheep fattening. Water sources
include rivers, streams, ponds, deep well, pipe water and springs, while rivers are the major water sources.
Sheep productivity is influenced by a complex interaction of the genetic potential of the breed, the
production system and the production environment. Sheep breeds reared in the study areas are almost
exclusively indigenous breeds (Doyogena, Menz and Bonga). The mode of production determines the level
of productivity and production.
Family labor is the main source of livestock farm labor. Use of hired labor for flock management is minimal
and uncommon. Thus, the amount of household labor available and the manner of labor allocation are
critical to effectively carry out farm operation and influence livestock management techniques and
adoption of improved technologies.

Characteristics of sheep marketing systems

Sheep are often trekked or transported on carts to marketplaces. A mix of cattle, sheep and goats are
presented in typical livestock marketplace. In Doyogena, Menz and Bonga district, farmers market their
sheep at farm gates or the nearest local/primary markets.

Profitability analysis
Profitability of any business is based on the relationship between the return on the investment and
associated costs. Based on the assumption stated under section 2 and primary data collected from the
project sites, profitability of sheep fattening for the three study areas with different mode of fattening
summarized as follows:
Table 1: Profitability of sheep fattening business with different model of fattening

Fattening cost and return External grazing (sheep is left for Semi-Intensive (sheep will spend half Zero grazing (sheep are confined
external grazing and they return to the day in open fields and half day in to the sheep shed)
shed only in nights) the shed)
Menz Bonga Doyogena Menz Bonga Doyogena Menz Bonga Doyogena
Variable costs
Purchase cost of sheep 21,000 51,250 28,000 21,000 51,250 28,000 21,000 51,250 28,000
Feed and/or labor 11,250 15,000 11,250 5,625 5,625 5,625 11,250 11,250 11,250
Medication 1,800 1,800 1,800 1,350 1,350 1,350 900 900 900
Other miscellaneous costs 1,125 1,500 1,125 600 750 675 450 450 450
Number of fattening days 225 300 225 120 150 135 90 90 90
Total Variable Cost (TVC) 35,400 69,850 42,400 28,695 59,125 35,785 33,690 63,940 40,690
Fixed costs
Depreciation cost of shade and 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
equipment (Annual)
Total fixed costs (TFC) 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000
Total Costs of Fattening (TVC+TFC) 37,400 71,850 44,400 30,695 61,125 37,785 35,690 65,940 42,690
Average selling price of a ram 2,350 4,000 3,100 2,350 4,000 3,100 2,350 4,000 3,100
Total revenue (TR) 47,000 80,000 62,000 47,000 80,000 62,000 47,000 80,000 62,000
Total Gross Margin (TR-TVC) per a 11,600 10,150 19,600 18,305 20,875 26,215 13,310 16,060 21,310
fattening cycle
Total Gross Margin per ram (per a 580 508 980 915 1,044 1,311 666 803 1,066
fattening cycle)
Total Net Income (TR-TVC-TFC) (per a 9,600 8,150 17,600 16,305 18,875 24,215 11,310 14,060 19,310
fattening cycle)
Net Income per ram (per a fattening 480 408 880 815 944 1,211 566 703 966
cycle)
Total Net Income (TR-TVC-TFC) per 15,573 9,916 28,551 49,594 45,929 65,470 45,868 57,021 78,313
annum)
Net Income per ram (per annum) 779 496 1,428 2,480 2,296 3,274 2,293 2,851 3,916
The study considered three fattening practices for each area. The first one is external grazing, the method
which is widely used in most parts of the country and project sites. In this practice, sheep are left for
external grazing and they return to shed only in the evenings. There is no feed cost incurred by the
farmer/youth group. The major cost for external grazing was labor cost for flock herding. Based on the
daily labor cost of each area, a group incurred on average ETB11,250 for Menz area, ETB15,000 for Bonga
and ETB 11,250 for Doyogena district. If the group members manage sheep herding, this cost is considered
as an opportunity cost which should be included as a cost of the fattening business.
Compared to other production practices, the daily cost of external grazing is low while the fattening cycle
is too long which makes the overall cost of labor high per cycle. The average fattening days for external
grazing is 300 days (10 month) for Bonga and 225 days (7.5 months) for Menz and Doyogena districts.
Even though daily production cost is lower for external grazing, a youth group can fatten only about one
cycle per annum or three fattening cycles within two years. With no grazing, rams are ready for the market
within 90 days (3 month). The net income of the group per fattening cycle as well as per annum is also
very high compared to the external grazing system. Table 1 above shows that, the net income for external
grazing per cycle is ETB 9,600, ETB 8,150 and ETB 17,00 for Menz, Bonga and Doyogena district
respectively. However, within 90 days with no grazing model, the youth can generate a net income of ETB
11,310, ETB 14,060 and ETB 19,310 in Menz, Bonga and Doyogena district respectively. Although the daily
cost of feed per day is relatively higher for no grazing, the group/farmers can fatten their ram within 90
days and undertake the business for four rounds per year.
With 20 sheep per group in the first business year, each group can generate ETB 45,868 in Menz, ETB
57,021 in Bonga and ETB 78,313 in Doyogena. The Annual net income of no grazing practice in Menz and
Doyogena is almost threefold the income from external grazing and more than three-fold for Bonga
district.

ANNUAL NET PROFIT WITH THE THREE FATTENING

PRACTICES
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Menz Bonga Doyogena Menz Bonga Doyogena Menz Bonga Doyogena
External grazing (sheep is left Semi-Intensive (sheep will Zero grazing (sheep are
for external grazing and they spend half the day in open confined to the sheep shed)
return to shed only in nights ) fields and half day in the shed)

Figure 1: Annual net fattening profit

Figure 1 shows the difference in net annual income of three fattening practices. In areas where the cost
of feed and labor is high and there is a shortage of grazing lands, fatteners can use semi-intensive fattening
practices. The flock spend half day in open grazing land and use on average 2.5 kg of feed in the shade.
With this practice, according to the data from the district, on average fatteners can fatten a sheep 3 cycles
per annum in Menz and 2.4 and 2.7 round in Bonga and Doyogena district respectively. The average net
income of this practice is about two-fold of the external grazing practices. For example, a group in Menz
can generate 34,766 birr per annum in the first operation year with 20 sheep as startup business. In
addition to the ETB 34,766 net income, if the group members supply the feed and herd the folk by
themselves, the ETB 10,500 considered as feed and labor cost (opportunity cost of members), will also be
additional income for the group.

Business growth trend of the group

Based on the first-year profitability of each district under the three-fattening practice, the study also tried
to project the profitability of the group for following years. For instance, if each group invests 50% of their
annual net income on purchase of additional sheep, projected financial status of a group under different
practice and for each district is summarize in Table 2 below.
The result of the analysis shows a significant increase in number of sheep in the second year when they
reinvest portion of their income. The net annual income also significantly increases in the second year.
The increase in number of sheep, net income and other indictors varies from district to district, among
the three fattening practices. Although the net income increased for all fattening practices, the increase
for no grazing is much higher than the other practices.
Table 2: Second year financial status of fattening groups

Second year financial status External grazing (sheep is left for Semi-Intensive (sheep will spend half Zero grazing (sheep are confined to
of youth groups (if they external grazing and they return to the day in open fields and half day in the sheep shed)
reinvest 50% of their 1st shed only in nights) the shed)
annual net income on Menz Bonga Doyogena Menz Bonga Doyogena Menz Bonga Doyogena
purchase of additional sheep)

50% of annual net income 7,787 4,958 14,276 17,383 13,840 24,371 22,934 28,511 39,156
(ETB)
Additional no of sheep can be 7 2 10 17 8 17 22 11 28
purchased with 50% of net
income
Total number of sheep on 2nd 27 22 30 37 28 37 42 31 48
year
Net Income (per a fattening 17,255 9,910 32,397 24,930 15,836 38,369 26,416 23,275 49,846
cycle) on 2nd year
Second year Net Income per 863 495 1,620 1,246 792 1,918 1,321 1,164 2,492
ram (per a fattening cycle)
Total Net Income (per 27,991 12,057 52,556 75,828 38,534 103,737 107,130 94,392 202,153
annum) end of 2nd year
Net Income per ram (per 1,400 603 2,628 3,791 1,927 5,187 5,357 4,720 10,108
annum) on 2nd year
Increase in net annual 80% 22% 84% 118% 39% 113% 134% 66% 158%
income
 Increase in annual net income for different fattening practices
250000

200000

150000

100000

50000

0
Menz Bonga Doyogena Menz Bonga Doyogena Menz Bonga Doyogena
External grazing Semi-Intensive Zero grazing

Total Net Income (per annum) on first year Total Net Income (per annum) on second year

Figure 2: Increase in annual net income for different fattening practices

Figure 2 shows the growth of annual net income in the second year compared to first year for different
fattening practices. Even though, there is increase in net income for all practices, there is a significant
increase in no grazing practices.
In general, it can be deduced that sheep fattening is profitable in all three districts. Depending on
availability of feed, labor cost and grazing land, each group can decide on the fattening practice they
should follow. In areas where there is sufficient and inexpensive sheep feed, the study recommends using
no grazing practices that would generate better profit. Similarly, if the feed cost is relatively high and there
is available grazing land, fatteners can also use semi-intensive practices. Due to long fattening cycle and
low return to investment, the extensive grazing practices is the lowest profitable sheep fattening in all
three districts.

Constraints in sheep fattening

Sheep productivity is constrained by technical, institutional and socioeconomic factors. Constraints to
improved productivity identified are;
• Diseases
• Feed shortage
• Access to market,
• Lack of inputs
• Inadequate veterinary service
• Lack of livestock insurance
• Lack of access to credit.
Feed shortage is one of the limiting factors for increasing productivity of sheep fattening in most of the
study area.
Alternative access to market is the most important economic determinant for every business. Sheep
markets in most parts of Ethiopia are relatively good with some challenges. Price fluctuation, poor market
information, brokers and dominance of local collectors are among the marketing constraints identified in
the study area. There is no grading system and regular market information on prices and supplies.
Respiratory diseases, internal and external parasites, foot and mouth disease, pasteurellosis and sheep
pox are the most common diseases of sheep in the study areas. Farmers use different vaccination and vet
service to manage the diseases.

References
Solomon G, Azage T, Berhanu G and Dirk Hoekstra, 2010. Sheep and goat production and marketing
systems in Ethiopia: Characteristics and strategies for improvement. Improving Productivity and Market
Success (IPMS) of Ethiopian Farmers Project, International Livestock Research Institute (ILRI), Addis
Ababa, Ethiopia.