![The latest beef cattle farm financial performance data from ABARES shows just how much the lower market has bitten into cash flow. Picture Lucy Kinbacher. The latest beef cattle farm financial performance data from ABARES shows just how much the lower market has bitten into cash flow. Picture Lucy Kinbacher.](/images/transform/v1/crop/frm/38U3JBx5nNussShT8aZyYjc/9f376187-c43b-4beb-8498-2a8b3da5f1d0.jpg/r0_252_4928_3023_w1200_h678_fmax.jpg)
Cash-strapped beef producers will be relying on the value of their land for borrowing capacity and cost-of-production gains will be critical for profitability this financial year.
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This is the word from farm business advisors as the extent of the decrease in livestock prices is added up at tax time.
Government economists believe the lower cattle market will wipe as much as 66 per cent off the farm cash income column for beef producers for the 2023-24 financial year.
They are estimating that drop on a national level will mean the average cash income for specialist beef operations will be $65,000, which is 60pc below the average in real terms for the past decade.
The latest financial performance of livestock farms from the Australian Bureau of Agricultural and Resource Economics and Sciences does, however, make the point that increased turnoff has helped moderate the decreases in cash income.
Against this, beef country has continued to rise in value.
Meat & Livestock Australia market information analyst Emily Tan says the ABARES data highlights what many producers already know - that the most valuable asset they have is their land, as opposed to the business itself.
Preliminary estimates for the 2023 Farm Data Portal from ABARES also pointed to the big drop in cash flow.
It showed in the second half of last year, the anticipation of drought-like weather conditions led to a market crash as producers turned off cattle earlier and faster at unfavourable prices.
As a result, cash income for cattle businesses for calendar year 2023 eased by 33pc nationally but in Victoria and Western Australia the drop was a whopping 80pc compared to 2022. Sheep-beef operations followed in a similar vein with a 53pc decrease across Australia.
The rate of return, including capital appreciation, for beef operations in 2023 eased by 15 to 63pc, according to ABARES.
Ms Tan said these two metrics indicated the reliance on land value to ensure borrowing capacity for beef producers.
Operational efficiency could not be achieved if profits don't keep up with increases in land value, as this will inevitably decrease efficiency, she said.
Agents say the ABARES data is in line with their estimated price reductions of 40pc on average across all categories of cattle between the 2023-24 financial year and the previous one.
Along with consultants, they say beef producer feedback is that cost bases have either not changed, or gone up. Factor in higher interest rates and that means cash is very limited right now.
"While this is a situation the cattle business has been in before - it's a feature of commodity agriculture - this time we're coming off extreme highs where a lot of people did let cost structures blow out," one consultant said.
"Driving COP down will be the only option but the challenge there is that is often about producing more, and that typically requires investment.
"It's not panic stations but there will be implications for the broader rural economy and the ability of producers to expand where seasons are providing extra feed.
"We are already hearing financiers are wanting better business cases given the cash pressures beef people are under."
- ABARES data has 39pc of Australian farm businesses classified as broadacre livestock farms. That is 34,000 farms, of which 22,100 are beef specialists, 8,900 sheep specialists and around 3000 a mix of the two. This data is for the beef specialists.