![Data from consultants Bush Agribusiness shows small differences in key productivity drivers makes a big difference in the profitability of a beef operation.
Data from consultants Bush Agribusiness shows small differences in key productivity drivers makes a big difference in the profitability of a beef operation.](/images/transform/v1/crop/frm/38U3JBx5nNussShT8aZyYjc/01559d89-35d0-480c-9649-fee1d3eb6871.jpg/r0_0_2880_1619_w1200_h678_fmax.jpg)
Most Australian beef is produced by the good operators who are profitable but they are the minority.
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However, the factors separating the top performers are straightforward and perennial, so - provided you have scale - moving into the list that makes money is within everyone's reach.
This was a key message from Bush Agribusiness managing director Ian McLean at an industry breakfast hosted by Meat & Livestock Australia in conjunction with the Northern Beef Research Update Conference in Darwin in late August.
Bush Agribusiness' 2023 Australian Beef Report, which details the long-term picture of beef business performance, will be released in September.
It shows that across Australia, the top 25 per cent of beef businesses manage 48pc of the herd, 44pc of the land area and turn a profit from producing 53pc of the beef.
More than three quarters of producers, in the south as well as the north, have less than 800 head and even in the last three year period of skyrocketing cattle prices, operate at a loss.
The industry profits are made by just the top 25pc.
![Bush Agribusiness' Ian McLean speaking at an industry breakfast in Darwin. Bush Agribusiness' Ian McLean speaking at an industry breakfast in Darwin.](/images/transform/v1/crop/frm/38U3JBx5nNussShT8aZyYjc/408c2ce8-d1e8-4f16-af33-5f9913b0eeba.JPG/r0_253_5760_3853_w1200_h678_fmax.jpg)
Top performers
First and foremost, those who are profitable have more productive herds which are more efficient at converting grass into beef, thus generating more income per animal unit, Mr McLean said.
"They are not necessarily chasing premium markets," he said.
"They target their herd expenditure more effectively, ensuring that every discretionary dollar spent provides returns.
"They generally spend less than average but they have productivity. They make sure they are getting $2 or $3 back for every dollar they spend.
"This is a tricky thing that changes from year to year and is different in different regions and systems but it's a skill the top producers seem to have.
"They use labour more efficiently and manage more animal units per full time job equivalent, which reduces their overheads. Labor is one of the biggest cost drivers in beef.
"And they have more operating scale. Lack of scale is a major structural issue for the industry. Small businesses can still be good operations but owners must be aware of scale constraint and have a strategy in place to address it, such as off-farm income."
All these things can be quantified but Mr McLean said the one that could not be quantified was intellectual capital.
"That is understated in our industry," he said.
Costs
Costs are important but low cost businesses aren't the best, Mr McLean said.
"You can't starve profit into a beef business," he said.
Income is driven by kilograms produced and the price received for those kilograms.
However, price received over time doesn't explain the differences with the top performers, Mr McLean said.
It all comes down to productivity.
"In the past few years, businesses with a high cost of production have been making good money," he said.
"Everyone's been having a great old time but as the market comes back down, knowing your COP will be key.
"It's only when the tide goes out that you see who is swimming naked. Those businesses with a high COP are going to be caught out in the next few years.
"Productivity explains most of the differences between beef businesses over time. Through the long term, price received is a distraction."
Small differences in the productivity drivers make a big difference in kilograms trucked off over time, Mr McLean said.
A 1pc increase in reproductive rate equates to an increased 0.7 to 1.5 kilogram of beef per adult equivalent.
A 1pc decrease in mortality rate equals 2 to 4pc more kilograms per AE.
A 10kg increase in sale weight equals 1.5 to 2.2kg more beef.
Know your farm
In northern systems, stocking rate is not a key profit driver, Mr McLean said.
"You want to run as many as you can but no more than you should," he said.
"You need to know your carrying capacity and your current land condition."
While most people say they are weaning at 80pc, the actual numbers show it's closer to 62pc.
"People don't realise they have productivity leakage," Mr McLean said.
"Therefor, there is no motivation to improve.
"You need to have good data on your production system."