Some farmers are considering diversifying pro-

duction to include several species of livestock

on their farms. This may be beneficial from a

marketing, production, and financial stand-

point, particularly if you are selling directly to

customers.

Customers who buy your beef are also likely

to purchase poultry, pork, and lamb from you.

By diversifying, you may be able to better uti-

lize your land, building, machinery, fencing,

labor, and capital resources in your production

processes.

It may also help you reduce risk, increase profits,

and improve cash flow. The purpose of this fact

sheet is to introduce you to some of the ad-

vantages of diversified livestock production and

to illustrate a spreadsheet that will help you plan

your production and analyze the profit potential

of diversifying.

Marketing advantages of diversified livestock

farming

The phenomenal growth in the number of farm-

ers’ markets and direct sales from farmers to con-

sumers can be attributed in part to the increased

diversity of products farmers now offer. While

fresh fruits and vegetables are still the primary

products, many farmers now offer meat, dairy,

and other livestock products for direct sale.

Consumers want variety in their food purchasing

choices. They also prefer the convenience of pur-

chasing multiple items at one stop. These pur-

chasing behaviors are in response to two well es-

tablished methods for improving sales and in-

creasing customer loyalty - up-selling and cross-

selling.

Up-selling is the practice of offering customers

products in addition to the product they are

Diversified Livestock Farming

FACT SHEET 928

2

currently purchasing. You may have customers

who are currently purchasing your beef but might

also purchase pork and chicken if the products are

available and they can do so all in the same trans-

action. Think of this as “filling their cart”.

Cross-selling is similar to Up-selling but it refers

to selling items that are closely related or can be

integrated with the other items being sold, for ex-

ample, offering eggs paired with bacon and ham.

If you are selling holiday turkeys, you might also

offer sausage for the dressing and a leg of lamb to

upscale the holiday feast. Your hamburger can be

paired with hotdogs or steaks can be paired with

pork chops for barbecues. Both up-selling and

cross-selling can increase sales volumes and pro-

vide a valuable service to your customers.

Offering your customers a diversity of products

can also help you differentiate yourself in the

marketplace from other farmers who are offering

only one species of meat products. Other attrib-

utes that you may use to differentiate your prod-

ucts include:

How it’s grown: Customers are looking for

specific production methods such as grass-

fed, cage-free, free range, organic, natural, or

a third-party certification designation.

How it is presented: Customers can be attract-

ed through unique processing methods, pack-

aging design, package sizes, labels, and addi-

tional value-added processing.

Where it can be purchased: Customers can be

increased through diversifying market chan-

nels such as on-farm sales, farmers markets,

Community Supported Agriculture, institu-

tional sales, cooperative marketing groups,

and retail food stores.

You should develop a separate marketing plan for

each species so that marketing resources such as

transportation, storage and freezer space, packag-

ing and promotional costs, regulations and licens-

ing fees, and marketing labor can be allocated

efficiently.

Marketing materials should tell your “story” as a

whole but also address each species separately.

Brochures and websites should inform your cus-

tomers about the advantages of purchasing multi-

ple products from you in one transaction.

Production advantages of diversified livestock

farming

From a production standpoint, there are many ad-

vantages of a diversified livestock operation. Pro-

ducing more than one species can have a syner-

gistic effect. That is, you can increase total pro-

duction through diversifying beyond what you

could produce through specializing on one spe-

cies. Overall production can be increased on fixed

land, fencing, building, machinery, labor, and

capital resources or only a modest increase in the-

se resources.

3

In grazing, the various animal species prefer dif-

ferent plant species, so that grass and broadleaf

plant populations as a whole are better utilized

across the growing season. Beef cattle can be fol-

lowed by poultry (broilers, layers, turkeys). Poul-

try offer the additional benefit of insect control.

Goats are useful for weed and brush control.

This increases total animal production on the

same amount of land while decreasing reliance on

cultural and chemical methods to manage unde-

sirable plant species. It is important to employ

intensive grazing systems with paddocks sized

appropriately to the number of livestock. The ro-

tation of the various species through the paddocks

should be carefully planned and constantly moni-

tored as growing conditions change. Fencing will

likely have to be adapted as the various species

have different fencing requirements. However,

new developments in fencing materials, particu-

larly electric fencing, have helped to keep these

adaptations cost efficient.

Buildings that may have been used for just one

species in the past can be more efficiently used

year around as they are adapted to the needs of

various species. For example, beef cattle housed

in a bedded pack barn over the winter can be fol-

lowed by pigs that will root through bedded pack

in the spring time.

Diversifying livestock enterprises may better uti-

lize labor resources. For example, labor require-

ments for beef may be intensive during spring and

fall calving seasons. During the summer, when

beef labor requirements are reduced, then the ex-

cess labor can be employed in broiler production.

Layers need a more constant supply of labor year

around in feeding and egg harvesting.

Livestock handling and transportation equipment

can be adapted to the various species. The fixed

cost of machinery is better utilized as it is spread

over increased livestock production.

Diversifying reduces production risk. For exam-

ple, diseases are usually species specific. If there

is an outbreak in one species which requires time,

expense, and loss of income to be brought under

control, then the other species can continue to

carry the operation.

4

To some farmers, having a varie-

ty of livestock on the farm makes

production more interesting and

enjoyable.

Economic and financial ad-

vantages of a diversified live-

stock system

Diversifying livestock can increase

production and improve profits.

This is particularly true because of

the relationship between fixed

costs and profit. Fixed costs are a

major expense in operating a farm.

Fixed costs are those expenditures

that must be made regardless of the

level of production. They include depreciation, in-

terest, insurance, land rent, property tax, salaried

labor, etc. As production increases for a fixed level

of resources, fixed costs per unit of production are

reduced and the profit per unit increases which also

increases overall profitability.

Diversifying livestock production can also even out

cash flow. For example, cow-calf or sheep opera-

tions often have sporadic cash sales as all young

stock from seasonal production are all sold in a nar-

row marketing window. Other species have differ-

ent production cycles which spread out sales and

create a more constant cash flow.

Planning and analyzing your diversified live-

stock system

Before embarking on a diversified livestock system

or adding a species to the current livestock system,

it is useful to plan the production numbers and do

an economic analysis to estimate the income, ex-

penses, and profit for each species and for the farm

as a whole. The economic analysis will help you

think through the inputs you will need. It will also

help you calculate the cost per pound so that you

determine the market price that you will need to set

on your products in order to generate a profit.

Table 1 is a simplified example of a diversified live-

stock analysis for a small, part-time

farm. The farmer has been selling 10

head of beef each year but wants to

increase sales by producing hogs

(25), turkeys (200) and broilers

(1,000). Each species is put in a dif-

ferent column and then the income,

variable expenses, overhead expens-

es, and profit are calculated for each.

Lines 2-6 calculate the income from

each enterprise. It is particularly im-

portant to estimate accurately the

average pounds of meat sold per

head (line 3) This is not necessarily

the carcass weight (beef and pork)

but the pounds sold to customers

which includes shrinkage. Equally important is esti-

mating the price (line 5) which is a function of mar-

keting strategies, production costs, and whether the

meat is sold by retail cut or in bulk.

Line 6 calculates the total income from each enter-

prise and the total for the farm. Line 7 calculates the

percent of total sales attributable to each enterprise.

This is used to allocate overhead costs (line 25).

Lines 9-12 calculate the variable costs for each en-

terprise. These costs vary according to the number

of livestock sold. This example farm buys young

feeder livestock and finishes them out. The cost of

the feeder livestock is on line 9. Usually the biggest

expense on a livestock farm is feed so it is im-

portant to analyze and calculate this carefully (line

5

6

10).

Lines 14 -26 are overhead costs that are difficult

to allocate out to the different enterprise so they

are just totaled and the total is apportioned to the

enterprises (line 27) based on their proportion of

total sales (line 7). Deprecation (line 26) is not a

cash cost but it is important to estimate and in-

clude since is reflects the annual costs (loss in

value) of buildings, fencing, machinery, and

equipment. Including it gives a better estimate of

profit. Tax depreciation can sometimes be used

but because tax rules allow rapid depreciation

then tax depreciation sometimes overstates the

actual annual costs of capital items and should be

reduced for the analysis. As mentioned earlier,

when overhead or fixed costs can be spread over

more species, the cost per unit of production can

be reduced and profit per unit of production, as

well as overall profit can be increased.

The variable and overhead expenses are totaled

on line 28 and subtracted from income on line 6

to determine total profit for the farm and each en-

terprise on line 29. This helps to understand the

importance of each enterprise. On this example

farm, beef is the most important product, yet

hogs, turkeys, and broilers all contribute signifi-

cantly to the total profit of the farm.

It is useful to calculate the cost per pound for

each enterprise (line 30). This is done by dividing

the total cost for each enterprise (line 28) by the

total pounds for each enterprise (line 4). The sell-

ing price should take into account the cost per

pound to produce each enterprise plus a margin

for profit which in this example must cover the

farmer’s labor and management.

On line 31, the total cost per pound (line 30) is

subtracted from the price per pound (line 5) to

calculate the profit per pound for each species.

This is a simplified example. You may be think-

ing about other livestock enterprises such as

lamb, goats, ducks, geese, eggs, and rabbits. This

analysis can be expanded for the number of enter-

prises you are considering. You may have costs

that were not illustrated here. For example you

may have a cow/calf operation where you have

breeding livestock costs instead for feeder live-

stock costs. You may also want to break out costs

for more detail. For example, you may want to

separate feed costs into forage and concentrates.

You could change or expand this analysis to meet

your own needs.

This analysis can be used for projecting the future

or for analyzing historical income, expenses, and

profit. A blank spreadsheet is included at the end

of this fact sheet for your use or you can obtain an

Excel template of this spreadsheet to do your

analysis by emailing Dale Johnson at

dmj@umd.edu. This fact sheet and an Excel tem-

plate can also be found at www.mredc@umd.edu.

7

8

Diversified Livestock Farming (2011)

Authored by:

Dale M. Johnson, Farm Management Specialist, University of Maryland Extension

18330 Keedysville Road, Keedysville, MD 21756

dmj@umd.edu

Michael R. Bell, Extension Agent, University of Maryland Extension

700 Agriculture Center

Westminster, MD 22157

mbell@umd.edu

Ginger S. Myers, Marketing Specialist, University of Maryland Extension

18330 Keedysville Road, Keedysville, MD 21756

gsmyers@umd.edu

Issued in furtherance of Extension work, acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, University of Maryland, College Park, and local

governments. Cheng-i Wei, Dean and Director of University of Maryland Extension.

The University of Maryland is equal opportunity. The University’s policies, programs, and activities are in conformance with pertinent Federal and State laws and regulations on nondis-

crimination regarding race, color, religion, age, national origin, gender, sexual orientation, marital or parental status, or disability. Inquiries regarding compliance with Title VI of the Civil

Rights Act of 1964, as amended; Title IX of the Educational Amendments; Section 504 of the Rehabilitation Act of 1973; and the Americans With Disabilities Act of 1990; or related

legal requirements should be directed to the Director of Human Resources Management, Office of the Dean, College of Agriculture and Natural Resources, Symons Hall, College Park,

MD 20742.