When we talk to Australian farmers, we’re always inspired by their passion for the land and their pride in its produce – but there’s another P-word that is of central importance to their survival, and that’s profit.
If farmers aren’t raising cattle for profit, they’re putting a lot of blood and sweat into a very expensive hobby. Successful farmers know that to secure a future in the agricultural industry, you need a business focus.
Beef prices are only the beginning
With raising cattle for profit being essential to your enterprise, it’s easy to become obsessed with saleyard reports and over-the-hook indicators. And if you looked at the March 2019 ABARES Agricultural commodities report, you wouldn’t be excited to learn increased beef production worldwide “will intensify competition in export markets and affect Australian saleyard cattle prices.”
But the price you receive for your cattle isn’t the most crucial factor for profitability, whether you’re running a cow-calf breeding operation in northern Australia or an intensive finishing operation in the south. According to the MLA, “Benchmarking studies consistently show producers have a much greater chance of improving profitability by managing the quantity of product produced and controlling their cost structures.”
The factors that have a significant impact on profit are called profit drivers, and it’s important to understand them if your business is going to head in the right direction.
Top profit drivers for beef cattle enterprises
Dr Rick White, head vet and leader of the Bayer Grow program, gives the most important drivers of cow-calf breeding operation profitability as:
- Stocking rate
- Pregnancy test rate
- Weaning rate
- Weaning weight
- Growth rates
These profit drivers aren’t concerned with things you can’t control – such as rainfall or saleyard prices – and they are all directly related to one goal: maximising the amount of beef produced on your property.
It’s the same goal that saw MLA develop More Beef from Pastures. The program includes handy online tools that make it easier to address the above drivers, helping southern beef producers to increase productivity and profitability.
“Benchmarking studies consistently show producers have a much greater chance of improving profitability by managing the quantity of product produced and controlling their cost structures.”
Meat & Livestock Australia
The importance of benchmarking
Australia’s beef cattle industry is one of the world’s most diverse, ranging from small cow-calf breeding operations on a few hundred hectares at the tip of Tassie, to sprawling enterprises like the 15,746-square-kilometre Anna Creek Station, east of Coober Pedy.
It’s imperative that you measure your profit drivers against similar producers in your region; the MLA has found that successful producers continually benchmark themselves to stay ahead of the game. Other things that contribute to above-average profits include:
- higher stocking rates – and more stock per unit of labour – than the district average
- knowing costs of production per kilo of product, and being in the lowest 20 per cent for your district
- objectively assessing pastures, monitoring Feed on Offer and recording grazing days
- recording animal performance, monitoring weight gains so you understand how your cattle are tracking.
More than a numbers game
It can all sound a little dry, but understanding profit drivers and quantifying them only goes part way to improving performance. The knowledge farmers bring to the table can’t be overvalued.
An accountant scanning an Excel spreadsheet might think increasing stocking rates to match region-best breeding operations is simple arithmetic. Tom Blackford, an AgriWebb user and the farm manager at Eddington, north of Camperdown in Victoria, realises it’s a little more complicated.
He runs over 1000 head of Angus cattle with 10,000 sheep on the property and is producing 170-200 kg DW/ha. When we spoke to him about his plans for the operation, he told us he is looking at increasing the stocking rate – which will generate economies of scale – but isn’t rushing blindly into it.
“Finding the sweet spot is something we haven’t reached yet as we are in the early stages of a pasture development phase at Eddington,” he admits. “Obviously, you won’t get ‘more beef from pastures’ if there isn’t enough pasture for your cattle.”
Understanding your market and your cattle
An intimate understanding of your market and your cattle will affect your profit drivers. Rachael and Matthew Windrum, who use AgriWebb for record keeping on their property in Monkerai, NSW, breed and fatten Angus cattle. They decided to concentrate on their commercial beef operation a few years ago and are transitioning the breeding program to better suit market demands. For their operation, the selection of breeding stock with a quiet temperament is paramount. They use empathetic handling techniques, moving cattle by horse, and have invested in well-designed stockyards.
“The result is lower injury and illness rates, with less bruising, and a faster return to grazing,” Rachael says. “It leads to meat of better eating-quality – and it means a more enjoyable workplace.”
Rachael and Matthew have spent extra time and money creating a low-stress environment for their livestock, but it’s justified because they understand a long-term profit driver is selling into a market that will pay a premium for their high-quality beef.
It also shows how gaining a deeper understanding of profit drivers can make a big difference to the way you run your operations. Digging into figures around stocking rates, efficient breeding stock or growth rates doesn’t have to be a chore. Instead, it can empower you to pursue your passion with renewed enthusiasm.