Campbell Woods
At AgriFocus, we have seen our clients’ income per stock unit from beef increase from $65/SU, to $164 over the past 15 years. At the same time, the percentage of income derived from cattle has increased from 9% to 17% last season.
On top of this, our clients income from grazing has gone from 0% 15 years ago, to 12% now, so all up our Cattle income has gone from 9% of our farmers incomes, to close to 30% of income (this is in Southland). This is driven by a number of factors.
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 inside the farm gate which will dictate success and failure.
Gone are the days of a beef cow simply being a cheap mower doing a development job out on the hill, it is also the source of a highly valuable product. We have seen the rise in the value-added product of grass fed beef globally over the past decade. In New Zealand we are well placed to supply this market. This lift in income over the past few years in particular has allowed for greater investment in genetics to continue moving our product in the right direction.
Even the smaller scale operators have been able to go and pay a bit more to get a better bull, to in turn drive more income the following seasons. Our decisions today, largely won’t have an outcome/impact financially on the business until next year at the earliest.
What has also increased the beef market in NZ is the huge rise in dairy beef calves being raised on a yearly basis. A lot of smaller operators use this to supplement their income.
With the movement away from sending calves on the bobby truck, calves being reared have flooded the market. We have seen the store market for cattle drop off in the past two years.
The traits 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 the breed.
It may be selling the beef calves at market at weaning, but the earlier maturing quality ones seem to gain a premium at the sales because of these traits. Or they may keep the calves and sell them in the spring as a forward store, or finish them themselves before the second winter. Or it may be Friesian Bulls that are reared/bought at 100kg, under the right conditions and providing they have quality feed, they can be the most efficient converters of drymatter into carcaseweight.
It is the quality bulls that pack the weight on and can be killed earlier than the average (16-18 months) that tend to be the most profitable, as they are still an attractive store animal if they need to be sold, as the purchaser knows it can be turned around and killed when needed (Southland, typically).
The key is having a diverse income stream, and if you don’t, how can you build some diversity into the mix to insulate your business from volatile times.
If you are rearing calves to sell at 100kg, have you got them all contracted? If you don’t and are planning on hitting the market with them, how many others are in the same boat? Yes, if you are rearing quality stock they will sell, but are there other ways to make up that extra income required. Or if we get stuck with the stock, can we do a good job and finish them, or do we have to gamble on the store market in the spring/summer/autumn?
The same goes for trading cattle you have bought in, if they are quality animals and you can feed them you will do okay, but what is the plan B and C?
We think the key in any business is to be in the driver’s seat, rather than the passenger seat. There are so many things out of our control in the markets we play in, and the great thing about farming is there is no ‘one size fits all’. Every farm and every business is unique and diverse in its own way.
- Campbell Woods is a client manager at Agrifocus, Invercargill.
