Increasing profitability on a Canterbury sheep farm through diversifying into deer : a dissertation submitted in partial fulfilment of the requirements for the degree of Bachelor of Agricultural Science in the University of Canterbury

Abstract

The benefits of diversifying into a weaner hind and stag buying/selling enterprise on a Canterbury sheep farm was assessed. The Lincoln College farm at Lyndhurst was used as a case study farm.

Linear programming was used as a method of analysis in determining the profitability of the deer relative to the sheep. Methods of reducing the risks involved were discussed and funding of the diversification was considered in terms of the debt situation of the farmer and the ownership arrangement.

At current prices for weaners, yearling hinds and 60kg carcass weight stags, the deer were far more profitable compared with sheep. The main factor reducing the relative profitably was a decrease in the selling margin for deer. Sheep returns needed to increase 90% before they were more profitable than the deer.

If money was to be borrowed by the farmer for the diversification the scale of the operation could not exceed eighty hectares. As the level of the farmer’s debt previous to diversification increases the scale of the operation needs to decrease. A 50% equity the farmer could borrow little money, therefore sole ownership can not be considered.

The most appropriate ownership structure for a large deer unit that would benefit from economies of scale would be a private company. A farmer paying for the costs of structures and providing the management for the deer would be able to establish the company with an equity as low as 50% before development. The farmer's objectives in increasing profitability and reducing total farm risk would be achieved.