PROFIT IN THE BEEF INDUSTRY


For some years we have been measuring the efficiency of our production system through the use of benchmarking. All financial data is fed into a standardized collection system and at the enterprise level, fixed costs are apportioned to each enterprise.

At the whole farm level we use indicators such as those used in many types of business.

The indicator commonly quoted for corporations is EBIT, earnings before interest and tax This is the measure of the efficiency of management.

The important indicator for the business itself in terms of looking at the capital invested, is Return on Equity. This gives an idea of how good the investment is, when compared with other options.

At the enterprise level, indicators can be used to highlight the efficiency of the production system and highlight the profit drivers which can make a real difference to increasing the profit coming out of the system.

WHAT DRIVES PROFIT IN YOUR BEEF SYSTEM?

After being involved in benchmarking for the number of years, this is a question we began to ask ourselves, especially in terms of where the genetics we provide improves the profitability for our clients.

In 1996 we held two seminars for clients in Wagga Wagga and Orange, N.S.W., where leading speakers discussed profit, and we launched The Rennylea Angus Benchmarking Service for clients.

Over eight financial years, over 60 businesses have undertaken benchmarking their whole farm and beef enterprise through our service.

WHAT DOES THIS TELL US ABOUT PROFIT?

Some businesses continue to make a good level of return, that is highly dependent on cost of production. In terms of the major profit drivers, cost of production accounts for around 50% of the difference in profitability between the average and the top 20% of produers. Another 25% is made up of three key profit drivers, namely how much is produced per ha, the price received and the gross price received per head marketed.

WHERE DOES GENETICS FIT INTO THE PROFIT PROFILE OF THE BEEF PRODUCER??

In a cow / calf operation, depending on the age and weight of turnoff, between 60 and 80% of dry matter consumed by the herd is maintaining the cow herd. Taking an average of 70%, that means that only 30% is consumed by the portion of the herd which brings in the income.

So maternal genetics, which fits the environment, which focuses on fertility, functionality and flexibility is the key to keeping the cost structure at an economic level.


PRODUCING SEEDSTOCK FOR HIGH PROFIT BEEF ENTERPRISES

Background Rennylea Angus

Ø Commercial since 1952
Ø A.I. since 1974
Ø Group Breedplan since EBVs began in 1985
Ø 900 recorded cows
Ø currently the herd is comprised of Herdbook and Angus Performance Registered cows.
Ø every animal in the herd has every trait measured for Breedplan every year. We are one of the few angus herds that measures mature cow weight, submit days to calving data, structurally assess every cow every year. Make sure you source your genetics from a herd which takes the input of data into Breedplan seriously and does not rely on wishful thinking.

Creating a High Profit Enterprise

Key focus is on productivity per hectare and the realization that the breeding herd consumes around 70% dry matter in the grazing system. So when we look at beef production on an enterprise basis, it is a paradigm shift from looking at individual animal performance . These 2 approaches are fundamentally different. When looking at on farm enterprise performance, meeting market specifications must be a key goal.

HOW DO WE ACHIEVE THESE GOALS?

Ø 1. Optimum performance, not maximum
Ø 2. The Factory (cow herd) must be efficient
§ Functional
§ Fertile
Ø 3. Adequately service the market and realize premiums are small part of the overall net profit.
Ø

1. OPTIMUM PERFORMANCE
Too much is made of maximizing performance. When one looks at enterprise performance, a different perspective is gained with the realization that kilograms of beef per hectare, produced at the cheapest possible price really makes one appreciate cattle that must work. The cattle that will work will be moderate framed, moderate to low birthweights, above average growth.

2. THE FACTORY
Efficient, functional, fertile cows. Very important that the moderate farmed cow is always going to rebreed quickly and calve without any fuss. Set the herd up for life by:

· *joining 90% of heifers for a maximum of 6 weeks.
· *cow herd joined for 8 weeks, maximum
· *bulls fertility tested and structurally sound
· *emphasis on moderate mature cow weight and not too lean
· *no tolerance of dystocia, moderate to low birthweight ebvs

Meeting high quality market specifications:

· *adequate carcase weight
· *EMA above breed average
· *fat cover, depending on environment but not too high
· *retail beef yield %, balanced can effect female fertility
· *imf%, you need cattle that are positive as this is a trait that is free for producers, as the cost of grain rises, highly positive IMF% will become more important, as feeders look for cattle that marble with less feed.

DO COMMERCIAL PRODUCERS GET THE CORRECT MESSAGE FROM SEEDSTOCK PRODUCERS?

1. Not enough work has been done with high performing cattle operating in high production systems. The limitation in many instances is an increase in performance reflected by an increase in cost. The paradigm shift from per animal performance to realizing the main profit driver for a commercial beef enterprise is productivity.

2. It was convenient for the seedstock industry in the past to seek excellence in the showring, to rubber stamp a seedstock herd’s excellence. In this day and age, the same trap is happening by continually maximizing ebvs, and promoting this as the way for commercial enterprises to gain profit.. Too often the seedstock industry has jumped on the next bandwagon, high growth, high birthweight, excessive leanness, excessive fat etc., always something new to promote without any clear view of how these things affect net profit in a beef enterprise over a ten year period.

For Rennylea, our real point of difference is developing a seedstock herd in a high profit production system and understanding how genetics and EBVs are designed to fit that system. We produce carcase and fertility angus genetics that are second to none in the Australian industry.

Profit is a 2 way street, producing the perfect consumer article can only be achieved within the constraints of running a profitable, commercial beef enterprise.

We are proud of our motto, CREATING YOUR FUTURE IN BEEF.