Where is the beef?
Getting under the skin of a beef farm's profitability
Published 30/11/2010 | 05:00
This week in our series of analyses of the profitability of Ireland's most popular farming systems, we look at the numbers behind the main beef enterprises. All the figures are based on averages derived from actual farm accounts for 2009.
Table 1 shows the gross margins being achieved by suckler farmers. We've compared the margins being achieved on single and double suckling systems. The latter highlights the potential for a significant increase in the overall margin from the enterprise, with a premium of more than €100/ac.
Table 2 highlights another dramatic difference in gross margins being achieved between two similar systems. A margin that is 71pc higher was being achieved last year on farms that decided against feeding animals over the winter. Instead, these farmers chose to buy stores in the spring and achieved significantly higher margins as a result.
Perhaps the most significant figures are those outlined in table 3. It confirms what many winter finishers have long suspected: by halving the stocking rates on the typical suckler farm, the net profitability of the enterprise actually increased by more than €500.
Projection A is based on a 100ac farm in a less severely disadvantaged area. It carries 50 suckler cows and the progeny are sold as weanlings in October/November. The farm has €55,000 total debt, is efficient and participating in REPS 4.
Projection B is based on the same farm having reduced its stocking by 50pc. It is assumed (i) that a 20pc improvement is achieved in gross margin due to lower stocking -- and the farm debt is reduced by 50pc as a result of stock reduction -- and (ii) that €4,000 is generated from the sale of silage or grazing from released land.
No account is taken of the time saved by the farmer having to deal with half the number of animals.
Similar scenarios emerge when the same de-stocking exercise is played out on a farm that specialises in a calf-to-two-year-old beef system. Again, both systems struggle to break even before the single farm payment is taken into account.