Optimal Herd Size for Commercial Viability

The KAL and BKB projections show that small herds are unlikely to provide a sustainable economic return for commercial operations. This is supported by a broader analysis on optimal herd size for commercial viability.

The analysis indicated that the internal rate of return (IRR) rose sharply from 4% to 12%, as herd size increased from 100 to 600 breeders, and then remained flat until herd size approached 2,000 breeders and IRR reached 13%. Net present value (NPV) at year 10 increased in a linear fashion from 100 breeders to 1,500 breeders, but then increased sharply at 2,000 head.

The efficiency gains that are achieved by larger herds particularly impact NPV, a major factor to be considered by investors committing significant funds. This would not surprise Australian producers, where commercial herds are generally over 5,000 head.