Beef clients cattle income up 30%

AgriFocus senior client advisor Campbell Wood takes a look at how its beef clients are faring in today's market.

In Business5 Minutes

AgriFocus senior client advisor Campbell Wood takes a look at how its beef clients are faring in today’s market.

At AgriFocus, we have seen our clients’ income from beef increase from $65/stock units to $164/su over the past 15 years. At the same time, the percentage of income derived from cattle has increased from 9% 15 years ago, to 17% last season. On top of this, our client’s income from grazing has gone from 0% 15 years ago, to 12% today. So all up our cattle income has gone from 9% of our farmers incomes, to close to 30% of income (this is in Southland).

People have had to diversify their businesses as volatility has continued to play a massive part in the agricultural industry, and it will continue to do so. The price we fetch per kg for any of our product is largely out of the farmers control, so it is the decisions we make on the inside of the farm gate that we can control which will dictate our success and failure.

From our client base, the ones we have seen do the best out of cattle are the ones who are killing them earlier rather than later. This generally comes down to the genetics of the animal. On the flip side of this, we have also seen a lot of dairy-cross beef animals being reared/bought in at 100kg, which haven’t been finished before the second winter, having to take them through the second winter and killing in spring. Yes, the schedule may be better coming into the spring than the autumn, but we cannot underestimate the cost of wintering a beef animal through the winter here in Southland. With ever increasing costs and pressures concerning winter grazing, a larger emphasis needs to be put on finishing these cattle before the second winter.

An outlet for a lot of these beef X heifers has been the live export market, and with that looking like it will be halted in the near future, farmers need to analyse what alternatives there are for these animals and what place they have on their farm if they cannot be sent away on the boat.

Beef performance

With the movement away from sending calves on the bobby truck, the amount of calves being reared has gone to the point where the market has been flooded. We have seen the store market for cattle drop off in the past two years. Where is the market/opportunities for these animals going to be without this market?

The traits that we see our more successful operators have in common in terms of beef performance seems to come down to quality livestock, and being able to finish the stock early, no matter what breed that may be.

In a trading operation it needs to be analysed on a per kg of DM eaten vs their profit margin. Going forward, if there aren’t these outside markets, people may want to pay more for straight beef calves at weaning sales where they know they can be slaughtered/sold for store in late summer/autumn. This is weighed up against the risk of having to take them through a second winter if there are no contracts in place in the spring. We have seen some clients be caught with these cattle for long periods, which comes at a detriment to the rest of their business, when they are trying to finish their other classes of stock.

As per usual, it is a risk vs reward scenario, which can be different for each individual business. This is where as business owners you need to know where each class of livestock sits in your business, and knowing what levers you have up your sleeve to pull.

  • Campbell Wood is a senior client advisor at AgriFocus, chartered accountants and farm financial advisors, based in Southland and Otago.