Valuation Of Livestock

People often ask, “How much is my goat/sheep/horse/cow/pig worth?”

Experienced breeders will advise new breeders that just because they paid $x,xxx for their each of their animal’s parents, that doesn’t necessarily mean they can sell their offspring for that price. The parent stock may have qualifications (or their parents may) or the breeder may have a reputation for producing animals of a certain quality or with certain traits that help set the price. An unknown breeder or animals that don’t have a proven track record for desirable traits may not command the same pricing. Other factors include things like drought, fire, war, financial recessions or skyrocketing market growth in adjacent markets, the health status of the animal or its owner or other market conditions.

If livestock are going to be a business venture, it pays to become familiar with the law of supply and demand in economics (https://www.investopedia.com/terms/l/law-of-supply-demand.asp). “The law of supply and demand compares supplier preferences (i.e. supply) with consumer preferences (i.e. demand). All else being equal, supply rises while demand declines as the price increases...The law of demand holds that the demand level for a product or a resource will decline as its price rises and rise as the price drops.“

We took advantage of our understanding of supply and demand to buy our first registered goat. We realized that we were heading into a drought early enough to buy sufficient hay for the year for our herd plus a few more head. As soon as everyone else realized a drought was upon us and that meant that hay would be hard to come by (because demand was higher than usual due to dry pastures and the supply was lower than usual, likewise due to lack of the rain that’s necessary to grow a good hay crop), everyone and their brother and sister was faced with the reality that they either could not afford to feed their livestock or they couldn’t afford to feed them as well as they usually could, so it was wise to sell off any animals they didn’t really need. This resulted in a flood of animals of every grass eating species hitting the market, both higher and lower quality animals. This is what is referred to as a “buyer’s market” where there are many more sellers than buyers and sellers can be super picky and negotiate for optimal pricing. It’s a terrible time to be a seller and a great time to be a buyer. That first registered goat was and remains our ideal for what a dairy goat should be, but buying her at a fraction of the price of what we sold her offspring for later wasn’t luck or an accident. It was a very deliberate strategy because we understood the law of supply and demand.

It’s an interesting note that we’ve lived and worked with livestock in more than one country and in our experience and those of our mentors, the sheep market tends to be steady and predictable and the goat market is all over the place. One of our mentors told us that even back in 1967 (in the US) it was the same way. Sheep remain steady and predictable, but with the goat market some years you can’t get enough goats born to satisfy the market demand and other years you can’t give a goat away. Given this observation for these two species appears to be long term and consistent even in different countries, it’s likely wisest to expect it to continue for the foreseeable future and plan accordingly.

Once upon a time we wanted to buy a vehicle. We found one we liked, but we couldn’t agree with the seller on a price that we afford. The seller wouldn’t take a trade in, but told us that if we took our current vehicle home, snapped a couple of photos and put it on Craigslist for a certain price it would be sold before the next morning. The price he claimed we could sell it for was more than enough to cover what we needed to buy the vehicle we wanted. We followed his instructions to the letter and the vehicle sold that evening for exactly the price he had said it would to the first person who came to see it. The seller of the vehicle we wanted was shocked to see us the next morning ready to buy the car. We didn’t understand his surprise and pointed out that he told us what to do. He informed us that no one ever did that! We told him that the way we saw it, he bought and sold cars for a living so he should know the subject well. We sell animals for a living and if we told someone that if they followed certain instructions, they would sell an animal, we were confident in our knowledge of selling to know it would work exactly the way we advised. The key takeaway is that if you want to sell animals, you’re going to need to understand your market.

What kind of customer is going to buy your animal? What traits or characteristics are they looking for? How much are they willing and able to pay for the animal? What problem do they have that your animal can solve for them? Your job will then become communicating your understanding of their problem and your proposed solution. That’s called marketing.

One of the harder things for some breeders to understand is that their buyers may not value the same things they do. For example, we value high milk production. Milk production can be measured in weight, volume or by the growth of offspring that is consuming the milk. Comparing animals by pounds or gallons or average daily weight gain may be the facts, but lots of buyers don’t make their buying decision based on those facts. They may ask about those things, but the buying decision may be based on herd name, coat color, or friendliness. Consider your market and what they want in order to better communicate what you have to offer.

This leads us to another critical aspect of pricing that cannot be ignored. If you’re running a business or trying to make a hobby profitable, you’re going to have a minimum amount that you can sell an animal for before you’re losing money. There are a number of ways to calculate this. One way is to take a year’s worth of expenses and divide it by how many animals you have to sell. That’s usually pretty close to worthless because you could be feeding 20 head of parent stock and only have a handful of animals you’re willing to part with because either you fell in love with the little ones or you are growing your herd or a sickness or predator took them all or just whatever. If you like playing with numbers, then it’s one way to look at them. It just doesn’t really answer the question though. A better way to look at it would be to figure out what it costs per year to take care of one of your female parent stock. Be sure to include the costs your males generate in figuring out the number. Then you should also figure out what it costs to feed each animal per day. Typically, if you want to sell an animal faster, you’ll need to sell for a lower price, but if you want to sell for a higher price it might take a little longer. If you know the average cost per day for at least feed then you can better determine if it’s in your best interest to lower the price to sell faster or hold out for a higher price.

This doesn’t mean that the market will support the pricing that the seller needs to sell at in order to remain profitable or continue their livestock business. One of the main reasons farmers go out of business or are forced to stop offering a product is because the price they have to sell at in order to break even is higher than what the market can support. We once knew a sheep farmer who also sold eggs from organically fed free range hens. He figured out that at his current rate of sales, it was costing him $6/dozen to produce the eggs with $0 profit. He had been selling the eggs at $4/dozen and the loss was more than he could continue to afford. He told his customers about his problem and they encouraged him to raise the pricing because they wanted him to stay in business since he expressed his willingness to continue even without a profit because he would try to make a profit on the sale of his other products just to be able to supply his customers with eggs. Well, when he raised the prices, sales predictably dropped so he was still producing the eggs at a loss. He was forced to shut down the egg production side of his business. People who are just selling a few surplus breeding stock or a few extra animals for meat may not set the pricing based on their expenses or profit margins, but the farmers that are selling animals to stay in business must consider this side of the equation. They may not have as much flexibility in pricing as a result, no matter how much they may wish to make a sale or like the potential buyer.

The best way we’ve found for figuring out what animals are currently selling for is to find out what others are selling for that cater to the same market you do. For example, while you may consider the price of an animal at auction or by the pound when sold on the meat market to set your lowest anticipated sales price, if you’re catering to the breed stock market that likely isn’t what the people buying and selling breeding stock are pricing their stock at. Ask questions, check webpages, breeder lists and Craigstlist. Make sure you’re comparing the pricing in a similar market. Bloodlines will matter if you’re selling breeding stock, but they won’t be a factor if you’re selling for the meat market. Match up what you’re selling with other animals with similar traits or qualifications when sold to the market you’re aiming for.

One of the most underestimated factors in pricing is actually friendship and collaboration between buyers and sellers. We often tell people that the highest quality animals are rarely listed for sale. The reason they aren’t listed is because they end up offered to a friend, sometimes deliberately and sometimes inadvertently in casual conversation an animal is brought up and the next thing you know the animal is changing hands. Sometimes there’s an arrangement for the animal to return or for it’s offspring to be offered back to the seller, sometimes it’s just that the animal seems to be a great addition to it’s new herd and the previous owner hadn’t yet formally thought about letting that animal go, but now that the topic came up it seemed like the thing to do. This is why we have often told people to let us know when an animal is of particular interest to them. We keep lists of people that are interested in particular animals so that if we feel like they would do better elsewhere or we really want to keep offspring and can’t keep both parent and offspring, we can privately let people know about the possible availability in case the timing works well for them. One time we privately notified someone of our interest in an animal only to learn the animal had already changed hands. Fortunately, we came to mind when the animal was offered back to the breeder we communicated with and they weren’t in a position to take the animal so they asked if we were still interested. Not long after we acquired the animal in question, their daughter made the Top Ten list for milk and butterfat production. Make friends. Communicate with those friends. The results can be very rewarding.

Sometimes people have contacted us about our animals and realized that our animals are way out of their price range. We are happy to refer them to people that we know who are selling similar quality for lower pricing. We firmly believe that people will get what they want out of life by helping enough other people get what they want and this is our contribution to that. Sometimes the animals are less expensive because they haven’t been handled or trained like our animals are or maybe they aren’t in as good body condition, but for an experienced handler or someone willing to put in the time to handle the animal and/or feed them well it can be a helpful arrangement for everyone. Similarly, we have been asked how we feel when someone sells animals from our lines for lower prices than we typically sell them for. We consider this to be a win-win scenario because someone wanting to sell gets the animal sold, someone wanting to buy is able to find a quality animal that they can afford and we benefit from the ‘advertising’ that animal provides when it’s highly successful with it’s new owner. This has often resulted in future sales for us at our usual pricing. Selling quality livestock doesn’t need to be a competition. It can be a wonderful collaborative effort that benefits breeders, animals and the breeds involved.

So we’ve considered a number of different factors in determining how much an animal may be priced at, such as characteristics of the animal, supply and demand, buyers, marketing and how quickly the seller needs to make a sale (someone relocating or in the hospital or selling out may sell at a lower price just to move animals faster). An animal’s training and body condition also impact sales price. Disease test status and if they come with nursing offspring, as bred animals or in milk in the case of dairy animals can all impact pricing.

At the end of the day, an animal is worth exactly what you can get someone to pay for them. No more. No less.