How beef producers can stay on the right side of consolidation

How beef producers can stay on the right side of consolidation

Stock and Land Beef
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Wire and water investments to pave way for 'safer' herd growth when season breaks

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CONTINUAL productivity improvement will be the only way for beef producers to stay on the right side of the current consolidation phase, agribusiness experts say.

As family farms get larger and larger, and official government figures show less and less farms on the books, knowing your costs of production and the successful traits of a beef operation in your region will be critical, ANZ Queensland corporate agribusiness manager Ben Barrett said.

Speaking at the recent Northern Beef Research Update Conference in Brisbane, Mr Barrett said beef producers who had invested heavily in water, wire and pasture improvement were seeing benefits.

For these people, once a normal season does arrive, that infrastructure investment would provide the ability to carry cattle and pave the way for Australia to grow its herd in a safer way, he said.

"Wire and water lends itself to more rotational grazing and giving country the opportunity to spell and getting biodiversity into feed," Mr Barrett said.

"Those who can better match stocking rates to grass reserves will have less volatility in their numbers and, in turn, be more profitable," he said.

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Fertility and genetics are the other areas which set aside the profitable producers.

"Controlled mating and a calving window in a tight band on a rising nutritional plane really helps with re-breed rates," Mr Barrett said.

"The difference between a producer running 10,000 breeders producing 5000 calves versus a producer running 8000 breeders producing 6000 calves is enormous. If you just change that productivity level, it makes a massive difference to financial outcomes."

Productivity was the number one thing that differentiated the good from the not-so-good in ANZ's customer base, Mr Barrett said.

Marketing was also a key area.

That means knowing who your customer is and looking to alternative markets to build in flexibility so you can adapt when market conditions change, Mr Barrett said.

And, of course, honing the financial management side must be a priority.

"You can be cracking in the paddock but unless you can tell the story around how your business is performing, unless you know your COP and the key drivers of profitability, you are only doing half the job," he said.

"Being able to articulate that to your financier and other stakeholders is very important."

Mr Barrett was joined in a panel session at the conference by northern producers Michael Lyons, Wambiana Station near Charters Towers; Jay Mohr-Bell, Katherine; Kevin Bell, WA and beef consultant Ian McLean, Bush Agribusiness.

Property prices a tricky balance

The tremendous capital growth seen in property values could be a challenge for the beef industry going forward, the panelists agreed.

"Valuers say its 11.59 on the property valuation clock but they said that 12 months ago too," Mr Barrett said.

"There is a new floor in beef prices and with the strong global demand outlook being outlined, we are in a good space but we have to be careful, as an industry, we don't pay too much (for property).

"Financiers have to stay focussed on the fundamentals and look at the ability to service debt. The underlying asset value has to be there. We all have to be realistic about the income potential of an asset."

It was a tricky balance at the moment, given the rise in land prices in recent times, he agreed.

"People are looking at their balance sheets and thinking they've never been in a better position," he said.

Mr McLean said when land values go up without any change in profits, it makes it very hard for rational people to justify expansion.

New entrants to beef production with "naive capital" would prove an ongoing challenge for industry, he said.

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The story How beef producers can stay on the right side of consolidation first appeared on Farm Online.

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