Production

Measuring the efficiency of beef production in a breeding business

Ian McLean, Bush Agribusiness, 09/02/2015

The efficiency of beef production (measured as kilograms of beef produced per adult equivalent per year) is one of the key profit drivers of a beef business. It is effectively a measure of how efficiently your beef operation and you as managers turn grass into beef.

The three main drivers of kg beef/AE are;

  • reproductive rate,
  • mortality rate and,
  • sale weight.

The Northern Beef Report found changes in each measure had the following effect on herd income (leaving stocking rates constant):

  • A five percent increase in reproductive rate will increase income* by seven percent (i.e. an extra 5 weaners from every 100 cows)
  • A one percent decrease in mortality rate will increase income* by two percent (i.e. one less death per 100 cattle run)
  • A five percent increase in average sale weight will increase income* by four percent (i.e. average sale weight of all animals sold increases by 5%)

(*Income in this context is gross profit, which is sales adjusted for purchases and changes in inventory)

In a breeding operation, the two main beef producing parts of the business are the breeding cows and the growing males, although value-adding of cull females can add a lot to productivity and the bottom line.

Using the Adult Equivalent methodology that Bush AgriBusiness developed for Meat & Livestock Australia, we can analyse breeding females and growing males separately, in terms of their efficiency of beef production.

In the first example a mob of 450kg composite breeding females are analysed over 12 months. They start and end the year at the same weights, so there is no weightgain from them. The analysis assumes a range of weaning rates, but assumes 5pc foetal losses from conception to calving and 5pc calf losses from calving to weaning. There is also a 5pc annual female loss included and they are weaning 180kg composite calves at 6 months of age. The graph below shows the kilograms of beef produced per AE per year from this scenario.

Bush 1

 

The efficiency of beef production goes from 55kg beef per AE per year at a 50pc weaning rate up to 100kg at a 90pc weaning rate. This indicates that the maximum productivity of the breeding females described, once fully grown, is around 100kg beef/AE/year.

To model the growing steers, we have taken the 180kg calves weaned at 6 months from above and analysed them over a two-year period, with weightgains ranging from 90kg/hd/year to 210kg/hd/year.

Bush 2

 

The above graph demonstrates that growing animals are more efficient at turning grass into beef than the breeding mob.

Even the lowest annual weightgain (90kg/yr) exceeds the maximum modelled from the breeder herd (100kg Beef/AE/yr @90pc weaning) for the first 12 months after weaning.

The graph also shows how the efficiency of the growing animals decreases as they get heavier, which is due to their increasing maintenance requirements as they grow. However the efficiency (Kg Beef/AE) of most annual weightgains exceed the calculated efficiency of the breeder herd up to (& beyond) the two and a half years of age modelled.

As well as grass, the other major input that must be considered when evaluating turnoff weight options is operating costs. A benefit of growing cattle in a breeding operation is that, generally, they cost less to run than breeders. A lot of the input costs and labour of a breeding business are associated with the breeders, and the growing cattle require relatively less time, effort and money.

The optimum point for any herd will be dependent on its genetics, the ability of its country and what its available markets are.

The principle is that breeding businesses should aim to maximise their reproductive rate, lower their mortality rate and turn cattle off at the heaviest weight that their country and available markets permit. This will increase the kilograms of beef produced per AE by the business, which is the most effective way for a beef business to increase income.

Growing out animals longer can mean receiving a lower price received, however the additional kilograms produced, which increases total income and lowers the cost of production ($/kg LW) of the business, more than compensate for this.

Financial analysis of beef businesses has consistently shown that cost of production is a key profit driver, while price received is not (refer to the Northern Beef Report for more information on this topic).

The above analysis also shows why trading or backgrounding businesses which buy young cattle and put weight on them can be profitable businesses.

However, it’s not all beer & skittles for them. They also have to account for trading loss on cattle purchased (the kg they buy are usually dearer than the kg they sell) and the buy-in risk (being able to source quantity and quality of cattle required when they are required) as well as the amount and efficiency of liveweight production.

The number of adult equivalents (AE) run is a critical consideration.

Grazing businesses should know and plan around their long term carrying capacity, with adjustments made around this, based on available feed in the shorter-term. This will help the business maximise, and stabilise, the amount of beef produced over time. The AE tools which Bush AgriBusiness developed for MLA are accessible here.

 

  • Understanding and maximising the profitability of your beef business is the focus of the Business EDGE workshops, which Bush AgriBusiness conducts across Northern Australia. Two upcoming workshops will be held in North West Queensland at Hughenden on March 9-10 and Cloncurry on March 12-13. For more information on the workshops, Click here, or contact Ian McLean on 0401 118 191.

 

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Comments

  1. Beanie Mackenzie, 10/02/2015

    An interesting read Ian but the figures appear a bit fudged. A 450 kg cow should be able to wean about a 220kg calf, 5% mortality seems rather high ,2.5% would be closer to the mark and this same percentage should be applied to the grower herd so we can compare apples with apples. If the producer is calving in spring and weaning before winter bites I would say the breeder would need less supplement if any during winter compared to the weaner. Also the sale of empty cows and those that don’t bring in a weaner should be contributed to the breeding herd therefore adding to its profit. As Graybull states, profit per hectare is probably a better way to go, we could get really technical and compare the value of hectares with the $s produced. In Qld there are many hectares that would wean a 220 kg calf but would not be able to put 200 kgs on a grower.

  2. Graybull, 09/02/2015

    Beef production efficiency is being measured incorrectly………IF you are interested in profitability. For profitability…….the measurement is profit per hectare or even kilograms of beef produced per hectare…………NOT kilograms of beef produced per animal.

    Those interested in true…….real world profitability will be wise to read and apply Johann Zietman’s concepts…….presented in his book…..MAN, CATTLE and VELD.

    http://profitableranching.com

    http://mancattleveld.com

  3. Grant Piper, 09/02/2015

    So, to be in the cattle business we all need to trade steers and not breed? Sounds like saying the medical system would work fine if only we could get rid of the sick people!
    Weaning a 180kg calf after six months is abysmal. 90kg weight gain in 365 days is abysmal. Weaning 50% is abysmal. If any cattleman hasn’t worked this out yet for themselves they should be doing something else.
    What about the trading costs of levies, freight, commissions, GST, losses etc of buying in stock that all come out of your pocket up front? Churning money for no gain.

  4. Peter Honnef, 09/02/2015

    The Northern Beef Report by published by MLA and produced by Ian McLean & others is one of the best reads on Northern Australia beef business. Its easy to read and follow, well researched and the data is presented in a way that really makes sense. Recently came across a beef business of where the cost of production ex finance was $150/ae. Only sold small weaners, were heavily in debt and in the hands of receivers. The knowledge in this report is invaluable to benchmark your beef business and change the controllable variables that can improve profit. A great tool for all involved in the beef sector and congratulations to those involved in its production.

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