Building a more profitable beef herd

May 19, 2021 12:26 pm

‘The Angus Influence – Performance to Profit’ seminar featured as part of the Beef Australia 2021 program during May and showcased insights from a range of members of the beef industry, covering what makes businesses profitable and how producers have successfully utilised Angus genetics in their operations in northern and southern operations.

SEPARATING THE TOP PERFORMERS

Kicking off proceedings was Ian McLean, Director of Bush AgriBusiness, a professional service firm providing independent analysis and trusted insights to pastoral businesses across northern Australia. Ian is a co-author of the Australian Beef Report and lead deliverer of the Business EDGE workshop.

During his presentation Mr McLean highlighted what separates the top performers when it comes to producers in the beef industry, the economic impact of selecting for fertility and how to improve business and industry performance.

When analyzing beef businesses, Bush Agribusiness lines up them from top to bottom, looking at how they perform based on return on assets and therefore comparing the top performers to those at the bottom end of the spectrum and identifying differences.

According to Mr McLean, whether it’s family businesses or larger businesses that rise to the surface, there is one thing they all do best.

“They’ve got more productive herds, which means they’re more efficient at turning grass into beef.”

“It’s not just the size of the animals, that’s important and part of the efficiency, but it’s the given amount of grass they’ve got to go into the system whether it’s measured in DSE (Dry Sheep Equivalent) or AE (Animal Equivalent) and how many kilos of beef are produced from that.  This is something the better performers consistently do, converting that grass into beef more efficiently giving them more income per animal unit.”

Mr McLean also highlighted that with the top performers, there was bettered targeted herd expenditure.

When looking at their discretionary herd expenditure, which covered things like supplementation, animal health, mustering and selling expenses, the businesses that perform better spend less than the rest per animal unit.

Therefore, the discretionary money that these businesses are spending is better targeted in finding ways so they spend money to make money, while understanding that if they do not get the return on investment, they will not spend this money.

Genetics were also identified as a highly important area of investment for beef businesses.

Mr McLean highlighted that when it comes to genetics, it is an area in which money well spent can provide excellent payback for producers, whereas money not well spent does the opposite.

“When selecting genetics, producers need to ensure that their management systems allow for the chosen genetics to fully express themselves, and to ensure that when selecting genetics, they must be those that will improve the bottom line for your production system”.

“You are able to select on different things and don’t forget to focus on the bulls because bulls have more than 20 times the genetic influence that females do in terms of calves produced.”

“There is an increasing amount of data, which Angus have been on the forefront of for a while, available on genetics, so use the indexes for selection. Identify the index most applicable to your production system as it’s a great way to rank bulls’”.

It was also highlighted that the top performers use labour more efficiently in their businesses. This means having production systems and the infrastructure set up to do what needs to be done while doing it with less staff.

Most importantly, Mr McLean identified greater operating scale as another key driver for top performances.

“If you have operating efficiency and operating scale, you’ll have a good beef business.  The abundance of one won’t make up for the lack of another.”

In terms of metrics, Mr McLean identified herd productivity as the efficiency of production (North = kg beef/AE and South = kg/ha).  The question posed to the audience by Mr McLean was “how efficient is your beef factory at turning grass into beef?”.

He noted that there are a number of variables in efficiency of production including, reproductive rate, mortality rate and sale weight.  These variables were established after research across a number of different data sets in northern and southern Australia of both small and large businesses.

Some regional differences were established between northern and southern, based off data from the Australian Beef Report.

What this research found was that in the southern areas of Australia, particularly the south east, the herds were found to be more productive based off more income per animal unit, due to the highly productive environment this data was pulled from, which results in generating more kilos of beef per animal unit comparatively to the more expansive, lower rainfall areas of the north.

However, in terms of expenses per animal unit, of those with the highest income per animal unit, they also have the highest cost per animal unit, due to higher input systems and smaller operating scale compared to operations based in the north.

“The south, as an average has lower profits then the north. That’s driven by scale because the average producer in southern Australia is a smaller scale than the average producer in northern Australia. Weight for weight, southern producers perform better in that the southern performer of scale will perform generally better than a northern producer of the same scale.”

“What we shouldn’t interpret from this is that all of the south is less profitable. It’s just the south is more constrained by scale. What I think is more important than looking at the differences between regions is look at the differences within regions. Every region has its challenges, advantages and disadvantages, both generally.”

In terms of primary bottlenecks discovered during this research, herd productivity in the north is at a disadvantage, however operating scale in the south hinders profitability.  Secondary to these considerations for both producers in the north and south to assist profitability is targeting herd expenditure and labour efficiency.

FERTILITY IS KEY

Mr McLean discussed the QAAFI Project, a comprehensive study, drawing on the best available information on northern herd performance, business performance and genetics, undertaken to demonstrate the impact of genetic improvement of cow fertility on the bottom line of northern beef businesses.

From this research, both fertility and growth improved profitability in the regions investigated, however fertility was found to have the greatest impact on the bottom line of each of the regions investigated.

“The conclusions we came to from this study was that a balanced approach is best. Fertility should always be number one in selection for most production systems, and then in the more productive regions, the weighting on fertility can be turned down a bit and more emphasis given to other traits (eg carcase), however it still has to be at the top of the list.  Know the profit drivers for your production system, your target market and your area and select for that.”

PLANNING IS KING

The key message for the audience was, “To always know what you are working towards in your businesses and improving business performance through identifying an end goal, current strengths and areas of improvement within said business”.

Developing and implementing a plan for your beef business, and then adjusting that plan in review if necessary is imperative to ensure that producers are continuing to develop and be viable.

And finally, remaining accountable for the decisions within your business is also incredibly important.

Throughout investigations into large pastoral companies, Mr McLean found one of big things that set those companies apart is the accountability that is inbuilt and how they are able to provide good quality information and remain accountable for their actions.

“Producers comparing their decisions and actions against their business plans ensures they are achieving what they have planned to and are remaining accountable regarding what needs to be done in order to ensure they are abiding by set goals”.

Seeking ‘grey heads’ or people knowledgeable in the industry is also an important avenue for invaluable advice or experience to assist in improving areas within business.

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