Since the outset of the programme in 2016, gross margin per hectare (GM/ha) has increased by 38% across the four farms, from £602 to £835 last year. While a £233 increase in GM/ha is great progress, what does this mean for the farmers?
To put this in context, the four farms averaged 73.7ha of grassland for suckler beef production in 2020, meaning the increase in GM/ha is worth an additional £17,172 in physical gross margin (GM).
What is gross margin?
However, GM is not net profit. Fixed costs (FC) such as machinery repairs, building maintenance, insurance, etc, have to be deducted from GM.
GM is basically farm output (livestock sales) minus variable costs (VC), which are common to every farm.
VC includes fertiliser, grass seed, lime, purchased feed, vet, medicines and miscellaneous costs such as ear tags, haulage, pregnancy scanning etc.
GM/ha is used as a key parameter for comparing farms, as it is the best reflection of technical efficiency inside the farm gate.
High output is irrelevant if VC and FC are excessive. Likewise, FC are not directly linked to technical efficiency, nor are they common across farms.
For example, a business working on rented land will have a high conacre bill, yet this has no reflection on the level of herd management.
Analysing progress on farms
Table 1 outlines the four programme farms operating store cattle and steer finishing systems.
As some farms had a sheep enterprise or grew cereals, the grassland area used for suckler production is referenced as forage area in the table, rather than actual farm size.
At the outset of the programme, forage area averaged 72.9ha and increased marginally to 73.7ha in 2020.
Stocking rate also increased, and throughout the programme, this has been a key driver of farm profit. Ultimately, producing more stock from a similar land base increases output and sales.
The increase in forage area is not in line with stocking rate increasing from 1.56 CE/ha in 2016 to 1.86 CE/ha.
This means the farmers carried more cattle on a similar land base through improved grazing management.
This is reflected in the kilos of beef produced per hectare farmed, rising from 511kg in 2016 to 606kg in 2020, a 19% increase during the programme.
Barry farms at Garrison, Co Fermanagh. In 2016, he averaged 43 cows and sold weaned calves straight off the cow.
Sale weights averaged 351kg for calves around eight months old. Sale price averaged 189p/kg, bringing weanlings to a value of £663.
Increasing sale weight and value, along with compacting calving into autumn (August/September) and early winter (December/Janaury), were crucial to driving profit.
Calves are now sold at the yearling stage. Calves are bred from proven terminal AI sires, mainly Charolais. In 2020, sale weight averaged 435kg by 12 to 13 months old. Sale price averaged 231p/kg, giving calves a sale value of £1,005.
Concentrate use has increased by 10t, due to increasing to 60 cows and holding calves for longer. But this expense is being covered with GM/ha rising by £193/ha to £453/ha.
Fionbharr farms in Downpatrick, Co Down. Cows increased to 109 spring-calving animals for 2021, up from 75 spilt between spring and autumn calving in 2016.
Cows have been traditionally bred to Angus and Charolais bulls, but are now being served to AI sires.
The farm suits steer finishing and at 100 to 110 cows, the herd is at its limit from a labour perspective, despite stocking rate being 1.89 CE/ha.
Carcase weight marginally increased from 377kg in 2016 to 381kg last year, at an average price of 354p/kg.
Carcase weight will increase in future, as AI-sired progeny come through the finishing system. The aim is to produce a 380kg carcase at 20 months of age.
GM/ha increased by £297 to £907/ha, primarily through the rise in stock numbers. The move to 100% spring calving has benefitted the farm. Concentrates fed in 2020 totalled 76.6t compared to 75.4t in 2016, despite the farm carrying extra cows and more finishing cattle.
Calving interval reduced to 369 days in 2020, reflecting the improvement in fertility. This will also drive an increase in output in the future.
Alastair farms outside Antrim and increased cows from just over 60 in 2016 to approximately 100 in 2020.
The farm has consistently increased GM/ha throughout the programme, starting on £894 and finishing on £1,151 in 2020.
At a stocking rate of 2.6 CE/ha, the farm is at its limit for cattle. Cows are mainly Angus and Limousin crossed to sires of similar breeds, with Shorthorn introduced through AI for hybrid vigour.
The farm has moved from buying in replacements to home-bred animals with strong maternal traits to drive weaning weight.
In 2016, steers averaged 360kg carcase weight at approximately 23 months of age. Carcase weight averaged 345kg in 2020 at just over 21 months old, reflecting more Angus-sired stock. Steer price averaged 372p/kg in 2020, up from 334p/kg on 2016.
Ryan farms at Gleno, Co Antrim. GM/ha increased by 28%, from £646 in 2016 to £830/ha, with cows expanding to between 50 and 60 breeding females. While cow numbers are up from 2016, the herd did expand to 100 head by 2018, but has since reduced, with Ryan taking up employment off-farm in 2019.
Traditionally, Angus and Hereford sires were crossed to Angus and Hereford cross cows from the dairy herd. The herd has now moved to making use of Charolais genetics through AI and a stock bull. Ryan has established a market for selling in-calf suckler replacements directly off-farm, adding value to animals compared to finishing. Angus and Hereford steers averaged 317kg carcase weight in 2016 at 620 days and 351p/kg. In 2020, carcase weight remained on 317kg, but age of slaughter is down to 585 days at 388p/kg.
Concentrate levels have increased from 18t to 23t with the increase in cows and finishing cattle, but this is being covered by additional output and sale price.