NOTED agribusiness analyst and consultant Phil Holmes will explore performance improvement drivers in the northern beef industry during two important seminar sessions being held next month during Beef 2015 in Rockhampton.
Mr Holmes is one of the speakers engaged for MLA’s producer forum on Wednesday May 6.
His presentation is based on the recently completed ‘Northern Beef Report: 2013 situation analysis’, which was written to give producers a better understanding of the factors behind the different levels of enterprise performance across the region, and what can be done to improve an individual’s position.
Mr Holmes was one of two lead-authors of the report, along with fellow agribusiness consultant Ian McLean, from Mush Agribusiness.
Mr Holmes will return to the speaker’s rostrum on Thursday morning, May 7, for Beef Australia’s “Investing for the future- effective leveraging of the beef business” seminar, where he will this time take an investor’s eye view of the findings from the Northern Beef report.
MLA has just released a publication for producers outlining key findings for producers from the Report. It is designed to help motivated producers:
- assess and understand their own business and its strengths and weaknesses
- focus efforts by identifying important factors which have a big impact on performance
- remove distractions, by identifying factors which do not have a big influence on business performance
- develop their own roadmap to becoming a ’good business‘, or a better business.
The initial question asked is “What is a ‘good’ beef business?”
This is answered with a checklist or set of criteria on what a business should achieve, in the long-term, in order for it to be considered a ‘good’ business.
These criteria (drawn from Phil Holmes’ own PhD thesis on the financial and environmental sustainability of pastoral production in the rangelands) are then referred to throughout the publication and used as a framework for goal-setting.
The publication delves into some big-picture issues of beef business performance, including:
- profits and profitability,
- business returns and the cost of capital,
- debt management and debt safety,
- business scale and it importance
- valuing land acquisitions
- dealing with declining terms of trade.
The publication then ‘gets it boots dirty’ at paddock level, looking at what income the herd is generating, what it’s costing and what profit it is making. In doing so, it details what the key profit drivers are, and are not, for Northern Australian beef businesses.
The release of the publication will coincide with Beef 2015 in Rockhampton, where improving the performance of Northern Beef Businesses will be a key topic of discussion.
Key take-home messages:
Here’s some selected quotes from publication, to give readers an idea of its key messages:
- For some producers, profitability is not a primary motivator; lifestyle, educating the children and having a comfortable retirement are more important. However, it is the profitability of the business that will determine if and how these things can happen.
- Profitability is not optional for a ‘good business’ and must be a focus in day-to- day operations, and also in future acquisitions. The more profitable the business, the faster it will grow and the more likely it will be able to: meet the needs of the family afford and repay debt be in a position to take opportunities as they arise.
- Bigger isn’t necessarily better. Scale in northern beef production is one of the important factors that influence performance, but in itself it is not enough to guarantee success. For most businesses, improving performance at the current scale will deliver more benefits than attempting to increase scale.
- A discussion on the profitability of beef businesses would not be complete without addressing the elephant in the room, which is declining terms of trade.
- through all stages of the beef price cycle it is those that produce the most beef (per AE) that have the highest income (per AE).
- When the truck is loaded and heading to market, price received is very important and every extra cent goes straight to the producer’s bottom line. However, on the production side of the loading ramp, focusing on getting as many kilograms of beef trucked out, over the long-term, will do more for your bottom line than a focus on price received will.
There is a lot that can be done to improve productivity and a lot of room for improvement in northern herds, which means there is significant opportunity to increase income.
- It is important to have a good understanding of the cost structure of your business and to identify areas where you can make improvements and where you can’t. However, beyond optimising enterprise expenses and improving labour efficiency there is little that can be done and simply cutting costs can be detrimental to the business.
- The top 25 percent of producers are making more than the other 75pc because:
- they think differently and independently
- their property or station is primarily a business and they are businesslike in their approach
- they focus on the things they can control within their boundary fence, rather than be victims to things they can’t control
- they have and stick to a plan, ignoring fads, red herrings and silver bullets along the way
- they actively seek out new information, rationally assess all of it, and then apply elements that will be of benefit to their business
- they get the simple things right.
Profit is a function of both income and costs and both are important. Differences in income explain more of the difference between top and average producers. The top producers are making more money because they produce more beef from a more effective cost base.
- Ian Mclean and Phil Holmes are the lead presenters of the Business EDGE workshops across Northern Australia. They will be hosting a number of seminars during Beef Week exclusively for past graduates of the Business EGDE workshop, where a lot of the material in the new publication will be discussed. The publication can be accessed here.
- For more information on the Business EDGE seminars contact Joanne Herley at Bush AgriBusiness on [email protected] or 0427 118 699.
- Phil Holmes speaks at MLA’s producer forum on Wednesday May 6, from 1-5PM; and at 9.30am Thursday morning, May 7, for Beef Australia’s “Investing for the future- effective leveraging of the beef business” seminar. Click here to register for either seminar.