If Australian beef producers want to stay in business, they need to take a tougher approach in their on-farm decisions and management, according to consultant Dr Phil Holmes from NSW-based Holmes & Company.
Dr Holmes told delegates at last week's Herefords Australia Breed Forum in Hamilton, Victoria, that the Australian beef industry experienced an average of one price spike a decade and producers needed to be ready to take advantage of that.
"My research shows that 80 per cent of total profit generated per decade comes from that one price spike, the rest of the time beef producers are holding their own or struggling," he said.
"So you have to be investing heavily in improved on-farm productivity to capture these events before they are gone."
He said the reality was that if producers wanted an independent beef business, they required a minimum of 20,000 Dry Sheep Equivalents (DSE), which equates to 1000 breeding cows.
Working closely with six large cattle herds in the New England region of NSW, Dr Holmes has created a profitable beef enterprise using a simple set of guidelines.
And in good news for Hereford producers, Dr Holmes said the breed played a critical role with each of the six herds using Hereford sires in a crossbreeding program to produce Black Baldies.
"We can't afford not to crossbreed, 10pc hybrid vigour is not only free but comes at a lower cost," he said.
The herds mate for six weeks to 2pc bulls and all calve in the spring. Three of the herds are moving to a four week mating for heifers which has resulted in a boost to the pregnancy rates of first calvers.
Current pregnancy rates across the herds average 88pc for maiden heifers and 92pc for mixed age cows.
"Every day you extend mating for more than 42 days, the wider you open the back door on the herd and let more sub-fertile cows into the system.
"And I don't care where you are, you must calve in spring.
"We cannot match feed supply with feed demand properly and cost-effectively, which means feeding costs go up and stocking rate goes down."
According to Dr Holmes, Hereford breeders were underselling the benefits of their genetics, particularly when assessing bull cost and longevity.
"No-one talks about bull costs per calf weaned, but it has a potent financial effect on the herd," he said.
"We want every calf on the ground with a price tag sitting on its head as a function of bull cost and we want that price tag to be less than $30."
In Dr Holmes' assessment of 500 Hereford and alternate breed bulls, the results indicate Hereford bulls have significantly less culling due to leg and joint problems, penis related issues, injury and serving ability.
"The bottom line is Hereford bulls last for an average of 4.9 matings while Angus last for an average of 2.4 matings and that difference completely wipes out the black premium in my opinion," he said.
The case study herds do not attend stud bull auctions, preferring to purchase their sires on a contract basis with a clear set of Estimated Breeding Values (EBVs) specifications.
"We will look at the breed's average EBVs and compare them to our preferred bull supplier and that tells us where they sit in relation to the breed," he said.
"We can also see the direction the breeder is taking over time and the traits they are selecting for by collecting this information each year.
"Compared with a cow, a good bull might sire 225 calves in his lifetime so you should place much more emphasis on what is happening in your bull battery."
But he said the gene pool of highly profitable Herefords needed to be expanded and encouraged breeders to access US genetics to improve specific traits more quickly.
He urged producers to avoid selling in annual weaner sales.
In his case studies, the steer progeny is turned off at 500 kilograms liveweight which provided increased marketing options.
"You cannot be profitable if you calve in autumn or winter and sell in the weaner sales, we certainly can't afford it," he said.
"If we get steers to 500kg, this will get them into the higher end of feedlot entry in NSW and also gets them into the lower end of the grid for a grass-fed kill, but you need good growth for age and pasture management to do that."
Other key business targets for each herd included return on assets of 4pc, $30 earnings before interest and tax per DSE, costs of production of less than $1.10/kg of beef produced, more than 22kg of beef produced/DSE and labour efficiencies of about 12,000DSE/full time equivalent, although this figure will vary depending on the region.
