Livestock can stack up financially as a “break crop”, especially those generating more than $200 revenue a ewe a year, according to Rural Directions agribusiness consultant Simon Vogt, speaking at a recent workshop in Bordertown.
But he said successful integration of cropping and livestock depended on producers keeping their finger on the management of both enterprises and maintaining a low cost, high production business.
“We must ensure we are not eroding margins, letting volunteers or summer weeds get away or dropping a condition score in our ewes while we are focused elsewhere,” he said.
Mr Vogt said mixed farming businesses could be “win-win” in many situations, including finishing lambs on bean stubbles, integrating livestock with lucerne hay or seed, canopy management in early sown crops and sowing fodder crops early to test machinery and operators.
There were also many areas where medic or vetch pastures had higher gross margins than low yielding canola or bean crops, particularly in the Mallee and Upper Eyre Peninsula or in the frost or waterlogging prone areas of the Mid North.
But on the downside, practises such as delaying spraying out medic, clover, vetch or grass paddocks or choosing a grass or cereal-based pasture phase within the crop rotation to increase dry matter production may compromise the “king hit” opportunity on ryegrass, during the break crop phase.
A three-year financial study made possible by Meat & Livestock Australia funding has found a big gap in the profitability of businesses benchmarked in different agri-ecological zones of southern Australia.
The project was coordinated by Rural Directions.
It found in SA’s high rainfall zones such as the Mid North, Lower EP and Upper SE, the top 20 per cent were able to retain more than 30pc of their turnover as profit before tax in 2014-2016.
The remaining 80pc retained only 10pc of turnover as net profit, making them far less resilient to production or seasonal shocks.
The benchmarking found the top 20pc of businesses were achieving earnings before interest and tax of more than $20 a dry sheep equivalent and up to $35-$40/DSE in trading in current favourable conditions, but the remaining 80pc were achieving less than $10/DSE.
Mr Vogt said it was possible for average producers to move into the top 20pc without necessarily increasing their size of their properties.
It came down to their management, such as optimising their gross margins through individual animal performance and stocking rates.
They also needed to focus on a low cost business, especially labour efficiency and not having too much capital tied up in machinery.
“It is possible to replicate top 20pc performance, but it is not to say that it doesn’t take some skill, courage, discipline and grit to achieve it,” Mr Vogt said.
SIMPLE SYSTEMS DELIVER DOLLARS
KEEPING it simple is the key to having a profitable mixed cropping and livestock business.
“There might be a case for having both cropping and livestock but do we need to create unnecessary complexity within that choice with lots of different cereal varieties, multiple different grain legumes, a large number of livestock enterprises and spread out shearing dates?" Rural Directions’ Simon Vogt said.
He said simpler farming businesses were far more labour efficient.
To be in the top 20 per cent of profitable businesses he said producers should aim to generate more than $500,000 in income per full-time equivalent labour unit.
A stretch target is to generate more than $600,000 in turnover per FTE.
“Sixty to 70pc of costs in a livestock enterprise are driven by labour so often investments in labour saving infrastructure or technology can provide a strong return on investment,” he said.
Other tips included avoiding “enterprise conflict” where possible, such as not shearing in April, which is a “golden month” for cropping in terms of seeding and the associated preparation for it.
“If we are late with 10pc of our seeding program that can be clipping overall farm profit by 20pc,” he said.
