Right stock + feed = profit

Gore-based farm consultant Graham Butcher has spent more than a decade looking at c/kg DM across sheep, herd, calf finishing, bull and dairy policies and finds bull beef tops the list.

In Business9 Minutes

One would think that the decision from Fonterra to not allow on-farm slaughter of bobby calves from June this year would ripple through the dairy sector and create some difficulty and also some opportunities for calf rearers. Apparently not. After a discussion with a noted Southland dairy consultant, there is not much on-farm slaughter anyway, so it’s business pretty much as normal except perhaps for Jersey breeds. Dairy farmers will get about $30/calf at the works, give or take $5 for weight. They need to be at least four days old, which is about $20 worth of milk and farmer time of course. So, a healthy four-day-old calf at $80/hd seems reasonable.

From a beef perspective there appeared to be a glimmer of an opportunity to get some lower-cost calves for rearing and take advantage of a large resource that’s always been there.

So what is the bull beef opportunity?

The best place to start is to take a look at profitability (gross margins) of the enterprise in terms of profit against feed consumed – or cents profit/kg DM consumed. This gives the relativity of different enterprises and, providing you take all matters into account, it gives a global view of possible directions to take. What we can’t do with this approach is allow for the different resources each farm has and how different stock policies combine to improve pasture utilisation and quality.

Right now, the current relativity stakes are as follows:

c/kg DM

  • Breeding cows, selling weaners, calve as R2 10.3
  • Breeding cows, selling weaners, calve as R3 7.3
  • Breeding cows, finish calves, calve as R2 10.8

It’s not surprising to see calving at R3 has lower profit, but some farms need to do this. It raises the question of what could be done to rear heifers capable of taking the bull earlier, even if you need to run first calvers separately after their first weaning.

Some more beef options:

  • Autumn bought steer calves 11.6
  • Autumn bought heifer calves 11.4
  • Higher performance steer calves 12.0

No surprises here: autumn heifers (hfrs) and steers are about the same, which shows sensible purchasing by farmers. And, as with all finishing enterprises, the higher the performance (growth rate) the higher the profitability.

And now, the bull beef options:

  • Bull beef (100kg calves bought) 16.9
  • Bull beef (100kg calves reared) 17.8
  • Bull beef (100kg calves reared) high performance 21.1

So, there we have the relativity among a number of cattle options. All based on average production except for the higher performance autumn steers and reared bull options.

Bulls are significantly better at converting grass to profit, but it’s got to be high quality grass. Here’s a very important factor: both bulls and autumn purchase of calves need high quality. Breeding herds consume about 20% lower metabolisable energy (ME) pasture. If we make an adjustment for this, the breeding herd competes well with steer and heifer calf finishing. It comes down to the nature of your farm. Don’t underestimate the value of breeding cows, selling calves.

Here’s another important question. How do the figures above compare to sheep and dairy support?

Consider these figures:

c/kg DM

  • Breeding ewe, 135%, no hogget mating 11.8
  • Breeding ewe, 140%, 50% from hoggets 13.2
  • Breeding ewe, 155%, 85% from hoggets 14.4
  • Dairy heifer grazing, $8.50 to May then $12.50 17.7
  • All these comparisons are based on current values and costs.

I’ve been looking at annual c/kg DM issues since 2011. So I took a look at long-term trends by grouping sheep, herd, calf finishing, bull and dairy policies and looking at them over the last 10 years at yearly intervals (Graph 1). This will probably give a statistician bad dreams, but it demonstrates some points.

Bull beef tops the list, consistently good. Beef calves (autumn purchase) follow a very similar trend but are below bulls, also sometimes below sheep policies and sometimes not. Dairy support is good and less variable than bulls or beef calves. Sheep are outperformed by dairy support and bulls. Herd policies appear low, but remember that 20% lower ME issue. Taking this into account they are more competitive. If we did the analysis on an ME consumed rather than a DM consumed basis, differences would narrow.

The current relativity stakes are all very well, but farming is a long-term business and we can’t change stock policy on a one-off look. We need to consider policies for a much longer term.

Graph 1 shows a global look at long-term relativity. Breeding ewe enterprises are grouped together as are the herd selling calves and the bull options.

Remember, these figures are based on gross margins, which is the gross income less direct expenses and interest on stock capital. We don’t include costs that don’t change, i.e. accounting, repairs, etc. Nor do we consider drawings, tax, other interest or capital expenses. It shows the ability of an enterprise to convert grass to profit which is available for all those other things.

What I take from this is that in the long term bull beef and dairy support are better at converting grass to profit. Herd policies really fit in where lower quality pasture is an issue. More so than is indicated in Graph 1.

Autumn steer calves are quite volatile, sometimes good, sometimes not.

The skill of the farm manager is to take the attributes of different stock policies and match them to what resources your farm has to offer. Not everyone can do bulls, or even wants bulls, and not everyone can do dairy support. Not everyone has the ability to finish their own bred calves. But everyone can strive to get the very best out of whatever mix of policies are finally chosen.

The name of the game is, firstly, to utilise as much of the grass you grow as you can by selecting the appropriate class of stock. Secondly, put the grass you do grow into a class of stock that will convert it into the most profit. Don’t change policies unless there are sound and well thought out reasons based on the long term. As always, look for cost effective opportunities to grow better quality grass that will allow a step up in performance. You will be considered a successful manager if you achieve this.

Sounds simple doesn’t it?