Understanding on-farm profitability - AHDB Beef &...

Understanding on-farm profitabilityMark TopliffLead AnalystFarm Economics

Outline of talk• Economic trends at the farm level• Trends in productivity• Tools to help understand profitability

Economic trends at the farm level

A recovery, of sorts, in sucklerherd gross margins

Source: EBLEX Business Pointers/Stocktake – Lowland English Suckler Herds, average

050

100150200250300350400£ per cow

Direct subsidies

end

Higher cattle prices help extensive beef finishing gross margins

‐300

‐200

‐100

0

100

200

300

400

£ per head

Direct subsidies

end

Source: EBLEX Business Pointers/Stocktake – English extensive beef finishing, average

Volatile business incomes

Source: Defra/FBS, English Farm Business Incomes

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

Lowland Grazing Farms

LFA Grazing Farms

In current prices (£/farm)

Contribution to Superiority

34%

19%27%

20%

Extensive Finishing (over 16mths age)

Output Rep/Pur costs Variable Costs Fixed Costs

21%

14%

49%

16%

Beef Finishing (up to 16mths age)

Output Rep/Pur costs Variable Costs Fixed Costs

17%

11%

4%68%

Lowland Suckler

Output Rep/Pur costs Variable Costs Fixed Costs

33%

6%16%

45%

LFA SucklerOutput Rep/Pur costs Variable Costs Fixed Costs

Source: EBLEX Stocktake 2013/14

% of the difference of top third to the average

Trends in productivity

No improvement in calves weaned

2004/0588.5

2008/0988.3

2013/1484.9

Calves weaned per 100 suckler cows put to the bull

Source: EBLEX Business Pointers/Stocktake, English suckler herds

Reducing concentrate usage in LFA herds (kg/cow/year)

2004/05223 2008/09

168 2013/14143

Source: EBLEX Business Pointers/Stocktake, English LFA Suckler herds

Usage affected by• Price of concentrates• Availability of other 

homegrown feeds• Weather• Silage/hay quality• Price received for 

calves

Saving costs through reducing inorganic nitrogen usage

2004/5 – 78kg/ha

2008/9 – 60kg/ha

2012/13 – 44kg/ha

Source: EBLEX Business Pointers/Stocktake, English lowland suckler herds

Genetic potential of cattle continues to increase

E.g. Limousin recorded cattle• Ongoing

improvement in genetic potential in most breeds

• Has it been fully realised?

• More potential to come?

Source: The British Limousin Cattle Society

Greater productivity of sucklercalves

Calf daily weight gain (kg) birth to weaning• 2004/5 – 1.02• 2008/9 – 1.07• 2013/14 – 1.12

• 1970 – 0.89

Source: MLC/EBLEX Business Pointers/Stocktake

Steady improvement in the productivity of finished cattle

Extensively finished cattle daily weight gain (kg)• 2004/5 – 0.76• 2008/9 – 0.67• 2013/14 – 0.78

• 1973 – 0.63    

Source: MLC/EBLEX Business Pointers/Stocktake, Extensive Finishing Cattle

Age at slaughter trends

2006 2011 2014 2006 to 2014 trend

12-15 Months 6.7% 10.2% 10.9% Increasing

15-18 Months 10.8% 11.7% 8.9% Decreasing

18-21 Months 13.6% 15.7% 13.4% Little change

21-24 Months 19.3% 21.4% 20.4% Increasing

24-27 Months 20.6% 19.5% 19.9% Decreasing

27-30 Months 26.7% 16.1% 17.7% Decreasing

30-36 Months 2.4% 5.4% 8.8% Increasing

Source: British Cattle Movement Service, Great Britain cattle

66.6% 58.0%

Prime cattle carcase quality has improved

2005 2009 2014

England 41.3 48.8 52.1

GB 45.4 50.9 54.6

Source: EBLEX/MLCSL Carcase Classification – England/GB

% of carcases in E,U,R 1,2,3,4L classifications

Increasing average prime cattle carcase weights

Source: EBLEX/MLCSL Carcase Classification ‐ England

325 kg

329 kg

340 kg

2005

2009

2014

Driven by:• Genetics• More cattle in target 

spec• Heavier cattle more 

income per animal• Change in mix of bulls, 

steers and heifers

Summary

• Period of transition from direct to uncoupled support

• Profitability of sector remains a challenge• Costs have tried to be reduced• Improvement in physical output needed…• …but seeing better marketing of cattle and genetic potential 

Voting time

TESTQ1: Opportunity (imputed) costs are simply a theoretical concept made up by economists to confuse people

A. TrueB. False

58%

42%

Q2: As part of your normal line of work, do you help your clients benchmark their suckler/beef 

herd performance?

A. YesB. No

Yes No

50%50%

Q3: If you help clients benchmark their performance what is the main source 

for comparison?A. Reference books such as 

Nix, SAC and ABCB. Farm Business SurveyC. Internal client databaseD. AHDB/StocktakeE. Other

Refer

ence

 book

s suc

h as N

i..

Farm

 Busin

ess S

urve

y

Intern

al clie

nt da

tabase

AHDB

/Stoc

ktake

Othe

r

26%

17%13%

30%

13%

Q4: What is the best basis on which to calculate or benchmark 

herd economic figures?A. Per head (ie. Cow or 

finished animal)B. Per kg (ie. Per kg of output 

or carcase weight)C. Per hectare (Whole farm or 

forage area)D. No one way

Per h

ead (

ie. Co

w or 

finish

e...

Per k

g (ie.

 Per k

g of o

utpu

t o...

Per h

ectar

e (Wh

ole fa

rm or

 ...

No on

e way

10%

57%

23%

10%

Tools to help understand profitability

The Stocktake farm costings tools

Monitor costsManage performanceImprove returns

What is Stocktake       ?

• It is a web-based beef and sheep enterprise cost and performance benchmarking system

• Participants can benchmark against other participants

stocktakeplus.org.uk

• Data collected by AHDB, but can be used by consultants as well as farmers

• Aggregated data provides a national picture of the performance of the beef and sheep sectors

What’s involved?• Farm visit• Upload data to website• Validation of data• Approval of data• Report sent to farmer

Summary of data collected

Key Farm and Output DataLivestock numbers, weights and sales etc

Grazing, Feed and Crop Costs– Period grazed by breeding flock.– Tonnage and cost of purchased feeds and split between breeding flock and other livestock.– Tonnages produced and fed of home-grown forages and grain.– Home-grown crop costs – fertilizer (inc tonnages and type) seed, spray, crop sundries.

Labour– Family labour – hours worked on farm and split allocated to each enterprise.– Employed labour hours worked on farm and split allocated to each enterprise.– Cost of employed labour.

Livestock Costs Vet, Bedding, Preganacy Scanning, Livestock sundries and Levies and commissions.

Machinery and Power CostsSecond hand valuations and then machine repairs, machine hire, contracting, electric and fuel.

Property Costs– Building investment in the last 20 years.– Building repairs.– General farm maintenance.– Average field rent (per ac/ha).

Overhead Costs– Water.– Telephone.– Office, Subscriptions and Postage.– Professional Fees.– Farm vehicle costs.– Insurance.

England ‐ Lowland Suckler Herd 2013/14

England – Extensive Finishing 2014

Stocktake Plus Data

Performance data forTop 1/3 Average

Stocktake  Records

Enterprise recording tool

Flock Calendar

Herd Calendar

Performance Indicators,comparison and benchmarking

Physical data Financial data

Analysis of scenarios

Lowland April LambingFlock

Lowland March LambingFlock

Hill Flock

Lowland Spring CalvingHerd

Lowland Autumn CalvingHerd

Upland Spring CalvingHerd

Target Enterprises

Stocktake Plus

Complete costings tool and service

and web tools

stocktake.ahdb.org.uk

Any Questions?