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RANGELANDS MEMO – MARCH 2018
By Trevor Price, Northern Beef Development, Broome
In late 2017 Phil Holmes of Holmes and Company and Ian McLean of Bush Agribusiness published an independent review into the profitability of northern and southern beef production systems called the Australian Beef Report. The primary audience for the Australian Beef Report is commercial beef producers. The report summarises the key business and management components that characterise two groups—the top 25% beef producer and the average beef producer—using the author’s data and data from ABARES, MLA NLRS and ABS sources over 12 financial years to 2016.
This is a must-read for those beef enterprises serious about profitability. The methodology, economics and analysis are carefully explained and the data are well presented in both tables and graphs. The report also provides decision support tools to assist enterprises in conducting their own analysis. The report’s findings are very sobering and challenge the basis of industry profitability at the individual business level. Holmes and McLean identify two main barriers to being a top 25% producer. They are the structural barrier of operating scale, rarely an issue for producers operating in the northern rangelands, and operating efficiency.
On this basis, northern beef enterprises should consider focusing on the elements of operational efficiency within their control as the best way to increase profitability. This is likely to be more challenging than it seems as it will require significant investment in practice change at the enter prise level. Holmes and McLean articulate the three main areas of operational efficiency as: land, labour and herd productivity. For northern herds there is very little that can be done to vary the potential carrying capacity of the land, set by the nature of the environment. What you pay for land assets is within your control, Holmes and McLean argue, and they caution producers to consider the intrinsic value of the land rather than the list price in considering capital investments in land assets.
As a producer effort can also be applied to improving labour efficiency and herd efficiency. Holmes and McLean suggest that any effort to control costs should start with labour efficiency, which is inclusive of all the plant and equipment and consumable costs associated with that labour, for example vehicles and fuel to convey the labour on the tasks. The final area of focus, herd productivity, is an area requiring continual scrutiny, data recording and benchmarking. Holmes and McLean have identified three drivers of herd productivity, they are: reproductive rate (increasing); mortality rate (decreasing); and turn-off weight (increasing). Holmes and McLean indicate that an inefficient herd responds quickly to any attempt to improve performance.
The benefits derived from measuring and benchmarking your enterprise performance against local and regional producers are profound. This is the start of the journey to joining the top 25% producers and delivering increased profitability for your enterprise. Participants of the Business Improvements Program are well on the way to discovering techniques for improving operational efficiency through business planning, benchmarking and strategic interventions within their enterprises. I recommend this report to northern beef enterprises who seek to improve their enterprise’s profitability and who are willing to make the practice changes necessary to drive the evolution of their business.
For further information follow the following link: https://www.bushagri.com.au/abr/
This article can be found on Page 10 of the March 2018 edition of the Rangelands Memo produced by http://www.dpird.wa.gov.au