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Struggling Beef Farms Need Not Change Tack

08 July 2014

Low efficiency beef units in Australia have scope to boost profits without switching to another enterprise, a regional analysis shows.

High levels of labour efficiency, low costs of production and plenty of potential to increase productivity with minimal investment are the good news stories from the 2013 Southern Beef Situation Analysis, commissioned by Meat and Livestock Australia.

The findings reinforced earlier work about the opportunities for southern beef producers, write MLA analysts.

However, the analysis found that average profits per hectare in beef production have lagged behind most alternative enterprises in the southern region, excluding wool, in the past 15 years.

Report co-author and Holmes Sackett director John Francis said producers had ample scope to achieve large productivity and profitability gains at low cost.

“Improving feed utilisation or changing the system to better match feed supply with feed demand are two options,” John said.

“That doesn’t mean supplying more feed or investing in new pastures; it simply means using your existing feed more efficiently.

“Labour efficiency is another big opportunity because labour and labour-related expenses represent a large proportion of the total business cost, usually 40–50 per cent.

“Investing in labour-saving infrastructure usually pays; however, an investment analysis should accompany any investment on-farm.

“Farm business managers should look for returns on this investment of more than 20 per cent, and these levels should be easily achieved by the majority of producers.”

John said ‘attitude’ was one of the keys to success for the top 20 per cent of producers in the analysis, which was largely based on the Holmes Sackett Benchmarking Database.

“The top producers understand and focus on both the business side and the production side of the enterprise,” he said.

“They set a strategy and implement it diligently; they budget, monitor and review their business performance regularly and they are decisive.

“They also don’t go chasing rainbows – swapping from one enterprise to another, chasing high prices. They know they’re in a commodity business and the only way to be profitable is to have a low cost of production.”

John said the top 20 per cent also understood their farm didn’t ‘owe’ them a living.

“They improve efficiency by matching labour requirements to herd size. They understand there is a cost to idle labour or latent capacity.”

“If they’ve only got enough work for half a labour unit, then they’ll only put half a labour unit into it. The remainder of the time may be spent generating income off-farm.

“The best labour managers are now exceeding 20,000 Dry Sheep Equivalent (DSE)/labour unit, and the top 20 per cent have increased their efficiency by 7,000 DSE over the past 10 years.”

As well as controlling costs, John said producers needed to produce more kilograms of beef/ha.

“The most profitable producers consistently produce 75–100 kilograms more liveweight beef/hectare than the average,” John said.

“Producing more kilograms of beef/ha is usually driven by optimising the stocking rate, which means matching feed supply and demand. This involves calving at the right time, turning finishing cattle off prior to feed quality declining and having clear drought plans.

The report highlighted six opportunities for southern cattle producers to achieve low-cost productivity gains:

  • Improved systems through better alignment of feed supply with demand and taking feed quality into account
  • Improved understanding of fodder budgeting, tactical decision-making tools and implementation of a drought plan
  • Improved cost control to better match costs to production capabilities of the system
  • Productivity improvements in soils and pastures through better forecasting and decision support technologies
  • Optimising production, primarily through stocking rate
  • Labour productivity through improved efficiency, investment in infrastructure and automation

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