What is taken from livestock for breeding purposes but is fed does not have zakah in it, except in one case: if it is taken for trade.

The Shaykh : As for what is taken for breeding and keeping, but is fed, as is found with many farmers, there is no zakah in it. Why? Because it is fed, so it is not grazing livestock. This is unless the one who feeds it is trading goods. What does "trading goods" mean? It means that a person buys and sells. Let us suppose a man who buys and sells in sheep; he buys a sheep in the morning and sells it in the evening, or buys it in the evening and sells it in the morning. His aim is not breeding. In this case, he must pay zakah on it, even if he feeds it, because it is in the position of trading goods; in fact, it is trading goods. His expense on its feed is like the merchant's expense on the rent of the shop and the like. These are trading goods: gold, silver, and livestock.