What’s the best fit for your farm?

There is common contemplation about what beef enterprise best fits a farmer’s land and resource mix. The words ‘best fit’ are chosen as in many cases there won’t be a ‘right’ or ‘wrong’ stock class for a farm. Best fit is used to capture a whole farm system thinking process to account for and consider the distinct factors of an individual property and priorities of the owner.

Generally, the first line of thought for many is what stock class was run on the property before and what are mates or neighbours running. The big factors that help drive a cattle policy for farmers are typically land type, pasture management and financial return. This article is to challenge and push the thinking process to help identify the best fit beef enterprise for each situation.

The vast range of beef class options includes calf rearing for beef, beef heifers, steers and bulls of all ages and various trading times and breeds, breeding cows, breeding bulls, replacement breeding heifers/bulls, cull dairy cows, dairy replacement grazing and dairy cow grazing. There are numerous ways to include each of these stock classes within farm systems, each with their special benefits and disadvantages.

To begin the process of identifying the best fit beef for a property, the first step is to understand the property’s limitations. Also, consider what may be feasible without having to incur large capital expenditure to run a certain beef enterprise and ultimately a profitable cattle system. These limitations may include, but are not limited to, yards/ handling facilities (health and safety), contour, drainage, calf rearing gear/ facilities, animal health issues, quality feed availability or fence quality.

In some cases, capital expenditure will be justified. To compare livestock enterprises, a gross margin analysis is a good start to indicate relative profitability. To investigate the return on capital for major inputs, a cost benefit analysis can be done in conjunction with the stock class gross margins for comparison.

A cost benefit analysis is essentially the financial benefits resulting from the capital cost minus the total cost – including initial cost, additional interest, labour, maintenance allowance and other additional costs each year – to get the annual net benefit from the required investment. The payback period on the investment for the business can then be calculated to determine if this capital spend can be justified.

More things to consider

Other factors to consider are the main reasons for having cattle in the farm system and perhaps what proportion of cattle compared to proportion of sheep, deer or other stock is best in a system to achieve the business goals. For example, is it to control feed surplus and keep feed quality around the farm? Or is it to maintain the worm drench efficacy and worm burden on other livestock classes? Perhaps the farm has a greater area of fertile flatter country and can intensify the system to achieve greater liveweight gains and number of trades. Or perhaps the beef class is just filling a gap where another farm enterprise (e.g. sheep or deer, dairy unit or cropping farm) is the priority. Does the locality (access or market) influence the decision to buy/sell certain classes of stock and not others? Perhaps lifestyle, labour or the safety factor will guide which stock class will be best fit. Ultimately, all farm systems and owners will have their specific set of priorities for various reasons.

Once these priorities are understood, each remaining beef enterprise of interest can be evaluated accordingly to these priorities. This step will generally rule out many enterprises for a particular situation. Thus, it is important to accompany this step (before selecting enterprise options) with a gross margin analysis ($/head and $/kg DM eaten) specific to trading times expected to work with the feed available in the farm system. Historical pasture and stock unit data, or ideally a feed budget, can be used to ensure the designed stocking policy will fit together as a feasible farm system within the expected pasture growth profile.

At this point, once understanding the limitations of the farm, priorities of the business and the feed availability, the final step alongside an accordingly adjusted feed and financial budget is to list on a score chart the beef enterprises of interest to be investigated. This can include a 1–10 score next to each enterprise under all, or a select few, of the priorities, such as relative profitability via gross margin analysis discussed above.

Each of these priority factors can be given a percentage weighting of importance specific to the business. This can then be multiplied by the specific priority score and all summed to give an overall score for each enterprise.

In most cases, it won’t just be one beef enterprise that is chosen for a farm. The reason for this is clear when producing this chart for a farm, as one stock class will be a best fit for one purpose, e.g. cows for hills and keeping feed quality. Another class may be best fit for another priority, e.g. bull calves for gross margin and potentially market availability.

Using the thinking and process above will help identify cattle enterprises that are as profitable as possible, work within the distinct resource mix, feed budget and business goals to be ultimately ‘best fit’ for a farm.

• Braydon Schroder is a consultant with PerrinAg.