Taking stock of calf to beef profit factors

Gordon Peppard assesses the progress of the 10 farmers participating in the Teagasc Green Acres calf to beef programme

PHASE 1 of the Teagasc Green Acres Calf to Beef three year programme has finished so it’s a good time to look in detail at the performance and progress of the 10 participating farmers.

What is very noticeable from the table of results is that there are large variations across farms.

The 10 farmers started out at very different levels of profitability and over the course of the programme all have improved their margins substantially.

A number of the farms are still building stocking rates and improving efficiencies on farm while others are at or close to the planned levels.

There are also a lot of different management styles between farms in a number of the key areas like calf rearing, animal health, grass management, soil fertility and financial/farm planning.

Land type and stocking rate also has a bearing on the bottom line. Farm locations ranged from Kilkenny to Louth and Tipperary to Roscommon.

Table 2, highlights the main performance indicators from the beginning of the programme to present day.

Gross Output

Gross Output is the key driver of profitability on the farms. It is the amount and value of beef sold out the gate and is a product of the stocking rate, performance of each animal and beef price received. Two of these three are within the control of the farmer and need to be maximised at farmer level.

The average gross output across the ten farmers is €2,424 per hectare (ha) with a huge range from €1,837 to €3,329. The figure of €3,329 clearly shows what is achievable at farm level. Output has being steadily increasing from the beginning of the programme.

Variable Costs

These are the main costs associated with producing an animal for sale.

The average variable costs across all the farms are €1,366/ ha with a range of €895 to €1,768. Calf to beef systems are high cost systems and high output is required to carry these costs. The four highest variable costs on the Green Acres farms are feed, fertiliser, veterinary and contractor fees. These costs are outlined in table 5.

Feed typically makes up approximately half of the variable costs. As can be seen from the table, variable costs increase as output increases but at a lower rate. What is interesting is that the variable costs as a percentage of output have decreased from 65pc to 56pc over the course of the programme.

Gross Margin

Gross Output minus Varia- ble Costs gives you the Gross Margin.

This figure is the amount of money that is left to pay the fixed costs, tax, new farm development and living expenses.

The average fixed costs on the Green Acres farms is €584/ ha which is very typical of non-breeding dry stock farms which generally range from €450-€650.

The gross margin has increased steadily over the last three years, driven by the increase in beef output on the farms.

Fixed costs rose slightly in 2015 to reflect some on farm developments, particularly in the areas of paddock development on farms.

In 2016 this figure had stabilised again at €559. Again in 2017 it rose slightly to account for some further developments on farm.

Net Margin

The aim of the Teagasc Green Acres Calf to Beef programme was to have a net margin of €500/ha excluding all farm subsidies and schemes at the end of the programme. Having started with an average net margin per ha of -€40 in 2014 this had moved to €136 in 2015, €308 in 2016, and €475 in 2017 showing that the target is very achievable.

Profit drivers

The key to achieving a good margin on any farm is to have a good output.

There are three main drivers of profit on a farm: ÷Performance per livestock unit ÷Stocking rate ÷Beef/Sale Price

The first two are factors that can be controlled inside the farm gate by the farmer.

They are management issues and if the farmer can get these right he/she gives themselves every chance of a good margin. The third factor in relation to price is one that he/she can have little or no influence over, unless they have a pre-arranged contract price agreed with their processor.

As can be seen from tables 3 and 4, performance (output) per livestock and stocking rate have been increasing nicely since the start of the programme.

Gordon Peppard is programme advisor for the Teagasc Calf to Beef Programme