RECORD prices have flowed through to the highest ever profit generated for southern livestock operations in 25 years but managing costs and boosting productivity remain the cornerstone of prosperity in both beef and lamb.
Neither of those key findings from the 2021 results of one of the country's largest benchmarking projects, conducted by Aggregate Consulting, are surprising.
However, perhaps the fact that prime lamb operations came in quite a bit below beef and wool flocks in terms of profit per dry sheep equivalent will raise a few eyebrows, given the amount of talk in southern livestock circles about the wisdom of swinging over to sheep meat. The data is not supporting that.
Beef herds benchmarked a net profit of $38/DSE, wool flocks the same and prime lamb flocks $31/DSE.
Wagga Wagga-based farm business outfit Aggregate Consulting benchmarked 105 cattle herds, predominantly Angus-based, across southern NSW, Victoria, south eastern South Australia and Tasmania.
The average 787mm annual rainfall that fell across the properties last year was 11 per cent above what is normally received. That no doubt drove an average 6.9 increase in herd size, which consultant Peter Havrlant described as significant. Some of the herds rebuilt by 15 to 30pc.
Up to 70 or 80 different benchmark results were recorded across each enterprise.
The median herd size was 9049 DSE, average area grazed 1009 hectares and average annual stocking rate 12.9 DSE/ha. A total of 57,444 head were turned off during the reporting period.
Providing a review of the results in a Meat & Livestock Australia webinar, Mr Havrlant said the 2020-21 year was the most profitable for beef in the 25-year history of the benchmarking program.
Cattle prices played a big part but productivity could not be understated, he said.
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Top conditions
The key differences between the most profitable and the rest was income generated but management of supplementary feed and wage costs proved to be definitive.
The results indicate labor efficiency could be an area for businesses to refocus, Mr Havrlant said.
"The average annual beef price in dollars per kilogram live weight has nearly doubled from $2 in 2015 to $3.90 in 2021 for our database," he said.
"While income drove strong net profits, finding the balance between cost management and profit was critical.
"Over past 25 years, beef producers have been squeezed and have had to be productive to earn a profit."
But the bump in cattle price, which started when the season turned two years ago and continues today, hasn't been accompanied by an increase in costs of production.
"The conditions don't get much better for capitalising on a higher beef price," Mr Havrlant said.
The top 20pc of enterprises in the data set turned a profit of $60.97/DSE and the bottom 20pc just $8.92. The difference between the top and average was $19.
In terms of enterprise expenses, the top performers spent $1.90 less than the average and $4.50 less than bottom performers.
On overheads, the top spent $2.46 less than the average and $5.86 less than the bottom portion.
The difference in overheads really came back to labour management, Mr Havrlant reported.
"If we drive income per DSE, focus on productivity and be diligent with cost control these cents can become dollars quickly," he said.
One aspect to note was just how high cow and heifer values have actually reached, Mr Havrlant said.
The benchmarkers valued cows at $1800 and heifers at $1700.
"What that means is that in essence these businesses probably have an understated profit position for the year and will be in a very strong position to capitalise the coming season," Mr Havrlant said.
Labour
Throughout the past two decades, southern beef producers had made good gains in labour efficiency, Aggregate Consulting reported.
However, in the past two years, the huge uptick in cattle price was accompanied by the efficiency line for labour dropping below the trending curve.
"Obviously, everyone is optimistic about current conditions and looking to increase herd numbers, but potentially there is some slippage there in terms of labour efficiency," Mr Havrlant said.
"Record profit margins provides a good opportunity to set up for the future. Is there investment in labour saving that can add value to your business in the future?"
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