Beef Analysis Reveals Key On-Farm Profit Drivers

AUSTRALIA - An analysis of what makes the State’s top beef producers tick has found higher pasture utilisation coupled with low variable costs hold the keys to success.

4 July 2012

3 minute read

Oceania

Participants in the Red Sky Beef Business Analysis Project, run by the Department of Agriculture and Food and WA Beef Council, have taken part in a teleconference and series of workshops over the past fortnight to learn more about key profit drivers in WA beef businesses.

Department development officer Victoria Surridge said the teleconference and workshops were designed to ensure producers had access to their latest industry benchmarks and use the key findings to improve their own beef enterprises.

“The ‘improving beef profitability’ workshops were run in Esperance, Mt Barker and Nannup, while the teleconference involved producers from the Great Southern and South West,” Ms Surridge said.

“Those involved in the workshops examined the primary business and farm measures of profitability - efficiency, risk, and solvency - and worked on strategic planning for their own businesses.

“We will be running a follow-up workshop series where the participants from this year’s business analysis will have a chance to learn the latest industry results and develop individual strategic business and farm plans from their own Red Sky report.”

The programme helps producers to gain a thorough understanding of the key drivers behind their beef business and compare their results with industry averages and top performers.

Participants heard from consultant Alan Peggs who delivered the findings of the 2011 beef Red Sky benchmark survey.

Mr Peggs said the top 25 per cent of producers had fixed and variable costs totalling an average of A$329 per hectare, and made a profit of A$192/ha.

In comparison, an average producer’s costs totalled about A$380/ha with a profit of A$28/ha.

“Seventy per cent of the difference in profit is due to income, so producers need to focus on this,” Mr Peggs said.

“The top producers don’t get higher prices, they produce more beef per hectare. In fact, they average 30 per cent more beef per hectare which makes a big difference.

“What these figures show is that the best way to improve productivity and profitability is to improve pasture utilisation and stocking rates.”

Mr Peggs said while there was little room to move on fixed costs, there was room to examine variable costs, in particular supplementary feed.

“An average producer’s typical feed cost was double that of the top producers,” he said. “It needs to be examined how these costs might be brought back, whether it be time of calving, proportion of dry cattle, more perennial pastures or standing paddock fodder.”

The department will be collaborating with the beef producers involved in the Red Sky program to ensure key findings are implemented back on the farm in the most cost effective and efficient way to increase pasture utilisation, stocking rate and ultimately lift beef produced per hectare.

Producers interested in being involved with the Red Sky beef program have until the end of July to register by contacting Ms Surridge 9892 8444.