With another year over, can you answer five simple, but hugely important questions about your herd?

  • What did it cost to produce 1kg of liveweight on your farm in 2019?
  • How many kilograms of liveweight were sold this year?
  • What was your average price per kilo?
  • What was your average weaning weight and how many calves were weaned from cows that calved in spring?
  • What did it cost to keep a cow on your farm?
  • Unfortunately, not enough farmers know the answers to such questions. Yet they are fundamental to running an efficient, profitable suckler herd.

    Farmers who know such information tend to keep progressing year on year, as they can tackle production costs and herd output.

    Benchmarking your herd every year will provide answers to the outlined questions. The data is already on your farm.

    Sales receipts and purchase invoices which are used for VAT returns and farm accounts will give you all the information required.

    It is merely a matter of taking an evening to add up the farm’s annual income and expenditure. With the CAFRE benchmarking, this service is provided for free.

    The report is confidential, and the information produced will give a good overview of your farm’s physical and financial performance.

    So what information is required to complete benchmarking and what will it let your know about your suckler herd?

    1 Herd output

    Herd output is the number of cattle sold during the year across weanlings, stores and finished cattle. It also includes any cull cows or stock bulls.

    Start by pulling out all sales dockets from the meat plants and the mart over the last 12 months. A simple way to calculate this information is to use an excel spreadsheet on the computer, as the data will be much easier to total up.

    Include sale weights and price. Divide the total sale weight and sales income for live and deadweight cattle to get a herd average.

    When all this information is in front of you, look at the 10 cattle which were the lightest when sold, or lowest-value animals. What cows and bull were they bred from?

    Is there a good reason for these animals making less money? If not, these cows may be worth marking out as potential culls, especially if they have produced low-value animals over a few years.

    2 Work out variable costs

    Variable costs are exactly that – they vary as herd numbers grow or decrease, or when prices change at different times of the year due to demand.

    For example, fertiliser requirement rises in early spring when demand reaches peak levels, but generally eases in late summer. Similarly as the herd increases, more purchased feed is required and vice versa.

    Variable costs include all grazing and silage inputs (minus the contractor charges) such as fertiliser, lime and grass seed.

    They also include purchased feed, straw and veterinary costs. You can also include miscellaneous costs such as scanning, tags, lick buckets and electric fencing products.

    On farms that have use home-grown barley and straw, these commodities should be valued at the true market price, ie the price that could have been received if grain was sold or had to be bought in.

    There is no point in valuing home-grown barley at a discounted price, if it could have been sold at a higher price. Otherwise, you are subsidising your beef herd, which gives false production costs.

    A good target to work towards is to keep variable costs between 40% and 45% of herd output, with fixed costs at a similar level. If this can be achieved, it will leave a positive net margin of 10% to 20% of farm sales.

    3 Gross margin

    When variable costs have been calculated, subtract from herd output to get a gross margin (GM). Take this one step further and divide the gross margin figure by the area farmed (hectares), or by the average number of cows in the herd.

    This gives a GM/ha and GM/cow. A good target is a GM/ha of £1,000, or a GM/cow of £750. The same exercise can be applied to calculate herd output and variable costs on a per-cow or per-hectare basis.

    A target to work towards is a GM/ha around 60% to 65% of herd output/ha.

    4 Fixed costs

    Fixed costs (FC) include those costs which have to be covered regardless of how many cattle are on farm. These include diesel, machinery repairs, electricity, farm insurance and housing repairs.

    Contractor costs should also be included in FC, as farms with a high contractor use will have lower diesel and machinery running costs.

    In contrast, farmers who do their own slurry, reseeding and silage work will have higher diesel and machinery running costs.

    Therefore, if both scenarios are included under FC, it allows for a fair comparison between both systems.

    5 Calculate net margin

    Subtract FC from the gross margin. You are then left with a net margin, which you can again express on per-hectare or per-cow basis.

    Make use of the information

    Having gone to the trouble of carrying out a farm performance review, make use of the information to make effective changes to herd management. If you leave things as they are, why would profitability or output be any different at the end of 2020? Identify the things which can be quickly addressed.

    For example, applying fertiliser to grazing ground, on a little and often approach, at 25 to 30 units/ac every four to five weeks, will be much more cost-effective than spreading two bags/acre in late spring and again in late summer.

    Isolate cull cows in late summer, and target meal feeding to both the cow and calf outfit.

    This will allow earlier weaning. With the cow in good body condition, cull values can be increased, provided animals are sold before the real flush of cull cows around housing time.

    Another example of a change next year is to split cows and calves into male and female calf groups during late summer.

    This means that higher meal feeding levels can be targeted to bull calves, thereby increasing weaning or sale weight in autumn.

    Read more

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