Best profits for livestock producers in 20 years

Agriculture Victoria Farm Business economist Sam Henty said the results of the 51st Livestock Farm Monitor Project showed 97 of the 113 participating farm businesses recorded a positive 2020-21 profit result.

"The 2020-21 project results identified strong red meat prices and good seasonal conditions helped keep farm incomes and stocking rates high," Mr Henty said.

"Sheep and cattle producers are using the favourable conditions to prepare for future challenges, such as climate change, by investing in new or upgrading machinery, repaying debt and applying capital fertiliser to pastures."

Gross farm income for Gippsland was $1,183/ha, northern Victoria, $1027/ha and the south-west $1317/ha.

That resulted in a net farm income of $174/ha for Gippsland, $192/ha for the north and $417/ha for the south-west.

Return on assets ranged from 1.9pc (Gippsland) to 3.7pc (south-west), while return on equity was between 2.1pc (northern Victoria) and 4.2pc (south-west).

The report found timely rainfall across the year meant participant farms increased expenditure on pastures, predominately through fertiliser application, and spend money on repairs and maintenance.

Repairs and maintenance of buildings and fences were prioritised in each region followed closely by plant and equipment.

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The south-west recorded the highest profit in 17 years, with farms maintaining quality pastures and increasing stocking rates to the second-highest level ever recorded.

That was due to timely rainfall throughout the year and maintaining quality pastures.

It's wool sheep gross margin was down 6pc to $577/ha, its prime lamb gross margin was down 3pc to $763/ha and its beef gross margin was up 29pc to $869/ha

The increase in stocking rates was coupled with high red meat prices and improved fine wool prices, resulting in the second-highest average gross farm income ever recorded in the life of the project.

Fertiliser and purchased concentrates represented the largest expenditure items for south west participants, influenced by high usage and an increased price.

Purchased concentrate costs were a result of marketing decisions made on many south west farms to retain, and supplementary feed, lambs over summer.

While lamb and mutton prices remained high in 2020-21, a decline from the record prices experienced in 2019-20 resulted in reduced sheep sales income, which was the major influence on the decreases in prime lamb and wool sheep gross margins.

Wool sheep gross margins decreased despite an increase in the market price received for fine wool.

The report found producers reduced wool sheep stock sales and rebuilt wool sheep flocks, with the resultant increase in inventory bolstering wool sheep (non-cash) income.

Alison Bell, Kilmorey Pastoral, Woolsthorpe, will be selling weaner steers and heifers at Warrnambool in January.

"It's been quite wet, but in the last four weeks we have been looking for rain - you get one or the other," Ms Bell said.

She said she maintained low stocking rates, as it was easier to keep cattle and sheep on, in dry conditions.

"If it rains too much then we still haven't got as much feed, because half the ground is too mucky and wet."

The property probably had too much dry, high grass now.

"My daughter has five pet calves and they weighed really well, 370 or 380 kilograms, so I was really happy.

"The weaners are more 'solid', which indicates higher weights."

All of her 255 cow herd was back in calf, due to good conditions and rotating bulls through them, every second week, for nine weeks.

She said she'd be putting money back into the property, in fencing and fertiliser.

Mr Henty said farmers in northern Victoria doubled their profit in 2020-21 compared to the previous year and recorded the highest average gross farm income in the project's history for this region.

Northern farmers achieved this by increasing livestock and feed inventories and using the additional pasture growth to rebuild stock numbers, particularly in sheep enterprises, to the highest levels recorded in 17 years.

The region's wool sheep gross margin was up 54pc to $512/ha,, prime lamb gross margin was down 1pc to $470/ha and beef gross margin up 54pc to $525/ha

Farm income increased from already high levels as businesses took advantage of the high red meat prices , while increases to variable costs were minimised as favourable seasonal conditions reduced the reliance on purchased supplementary feed.

This was coupled with a decrease in the market price of stock feed.

Seasonal conditions improved for many farms across the north, with producers increasing spending on pastures through increased fertiliser application and expenditure.

"Producers used the additional pasture growth to sell trading stock later and rebuild stock numbers, particularly in sheep enterprises," the report said.

"As a result, farm stocking rates increased to the highest levels recorded in 17 years."

The high cash income and increased livestock and feed inventories led to the highest average gross farm income ever recorded.

"Improved pasture availability reduced the reliance on supplementary feed and allowed farms to reduce expenditure on purchased stock feed," the report said.

High livestock prices were offset by fertiliser and livestock selling costs.

"Livestock selling costs were the second largest expenditure item, with the high value of the trading stock in 2020-21 corresponding to high agent costs."

The report found In 2020-21, average earnings before interest and tax on Gippsland farms remained similar to 2019-20 and was the third-highest recorded in 17 years of the project.

The report found beef was the dominant enterprise of the region, so many farms were well placed to take advantage of the record high red meat prices.

Gippsland's wool sheep gross margin was up 41pc to $481/ha, prime lamb gross margin down 51pc to $529/ha and beef gross margin up 15pc to $691/ha.

Spring 2020 rainfall events in south and west Gippsland left some soils saturated and provided a challenge to harvest pasture for conservation.

Reduced quantities of fodder were harvested contributing to the decrease in regional hay and silage making costs and feed inventories.

East and central Gippsland had more favourable rainfall through spring and summer, resulting in increased pasture availability and less reliance on supplementary feed, which contributed to the reduction in regional variable costs.

"Producers used the improved conditions as an opportunity to rebuild herds by retaining trading stock," the report said.

Variable seasonal conditions experienced across Gippsland farms resulted in overall stocking rate remaining at similar levels to 2019-20

Consistent with the trend across the state, fertiliser was the largest cost item on Gippsland farms.

On average, expenditure on fertiliser increased in Gippsland, and this region also had the highest fertiliser cost per hectare compared to the rest of the state, due to additional freight costs.

Rising farmland and cattle prices resulted in Gippsland participants managing the highest value total assets per hectare.

Participation in the 2020-21 project was the highest in 12 years with increased participation underpinned by Agriculture Victoria's sheep and beef networks known as the BestWool/BestLamb (BWBL) and BetterBeef (BB).

Livestock Farm Monitor participants' identity is kept anonymous and each receives a confidential individualised report to use to understand the cash, profit and wealth position of their business which helps inform investment decisions (including loan applications), on-farm decision making and resilience building.