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The objective was to assess grazing as an element of profitability and competitiveness of a small-scale sheep production system (SSSPS) in central Mexico and compare its economic performance by means of an analysis of scenarios. A questionnaire was applied to 66 sheep farmers on technical variables, flock management, economic and social aspects. Two scenarios were analyzed to assess the contribution of grazing on profitability and competitiveness. The first analysis was when grazing was the feed base, and secondly, costs of opportunity and economic impacts were studied under the assumption that sheep do not graze and total feed has to be bought from feed vendors. In order to determine the differences between the farmers with the highest and lowest profitability indexes, a four-stratum stratification was made (stratum 1, between 6 and 35 sheep; stratum 2, 36 to 70 sheep, stratum 3 = 71 - 105 sheep; and stratum 4, 106 to 140 sheep). Quantitative variables (technical management, flock management and social aspects) were evaluated with analysis of variance, while qualitative variables were analyzed by means of a Kruskal-Wallis test. Production cost analysis and profitability index were assessed with the Policy Analysis Matrix. Differences were found between strata, farmers with more than 70 sheep have the best profitability indices and the least vulnerability before the non-grazing scenario. Grazing had a positive effect reducing the cost of production and increasing competitiveness in the four strata assessed. However, farmers with higher technical level, specialized breeds and larger flocks (strata 3 and 4) have higher economic profits.