Farm Table says:
This article is a set of observations made by Bill Holmes from his involvement surveying grazing enterprise profitability in western Queensland in the 1980s, and then performing options analysis for northern beef businesses until 2011.
His observations are broken out into the following categories:
- Accounting framework – Cash flow and profit
- Compliance (tax) accounting and management accounting
- More accounting – Profit and cost structures
- Accounting, budgeting and benchmarking
- Maximising herd profit
- Vertically integrated breeding and fattening
- The ‘store trap’
- Economics of stocking rates
- The Ten Commandments
His 10 commandments for analyzing beef business in NQ are:
- The profit centre is the steers. The one sure way of really messing up the profit is to get the male turnoff age badly wrong.
- The worse the breeder performance, the more likely that older male turnoff will be most profitable (depending also on steer performance).
- The better the steer performance (i.e. the better the country), the more you lose by selling the steers as weaners.
- If you’ve got good fattening country, get the steers on to it as young as possible.
- The market generally undervalues weaner steers relative to what they should be worth to their breeder as a growing or fattening proposition.
- Some producers are caught in the ‘store trap’, meaning that they know an older male turn off would be more profitable, but cannot afford the income sacrifice needed to make the change.
- There is a choice between selling say 50% of heifers while keeping the cows to an advanced age, versus selling, say 20% of heifers and selling the cows younger. The most profitable choice depends on relative branding rates and sale prices but will be driven mainly by the relative price of heifers and cows.
- Supplementation, whilst desirable and profitable, brings with it the possibility of unintended overstocking.
- In considering stocking rates or carrying capacity, numbers of breeders can be very misleading. The preferred method of expressing herd size is to use adult equivalents (AE).
- Over the long term, asset growth is usually more important than the physical product of the business, which highlights the importance of looking after the country rather than hammering it in pursuit of short-term gain.