Cutting Costs Key for Beef Enterprises 02/06/06
Improving profitability of beef enterprises by cutting costs was a key message
to producers at the National Beef Association’s Beef Expo 2006 in Carlisle.
Agribusiness leader Gerard Keenan, head of the Irish feeder wagon manufacturer
and a major sponsor of the event, told around 400 farmers on Thursday evening’s
pre-event conference that they should follow his own company’s lead
taken in the post-BSE depression in 1998 by cutting costs by 30 per cent.
And Scottish independent consultant Peter Cook said beef producers should
take the opportunity over the next 10 years under the transition of the Single
Farm Payment to re-shape their businesses and design the cow which produced
the same output with dramatically reduced fixed costs.
Gerard Keenan told the conference: “We suffered a 50 per cent drop
in our business in the UK and Ireland in 1997 and we employed an Australian
consultant who said 30 per cent of our costs could be saved – just
saving 10 per cent would not be enough.”
As a result, Keenan concentrated on three areas – being right first
time, every time with consistent quality; reduced waste; and improved profits – and
that year the business returned to profit.
Feed strategies developed by the company in the last couple of years improved
suckler cow margins by an average £150 a cow place within a two year
cycle, he said.
Peter Cook advised farmers to plan their businesses with a view to earning
the vast majority of their payments through environmental schemes and compliance
measures.
He predicted that the total numbers in the beef industry would remain similar
but that the cattle would move down the hill with the marginal cropping areas
soaking up the livestock.
He said currently the average suckler herd finishing its calves, without
subsidy, was making a loss of £60 a cow, based on output of £530,
variable costs of £300, labour £100, power £110 and other
costs of £60.
A family business might take out the labour cost which could leave a profit
of £60 but just to give a 10 per cent return on capital, a profit of £100
was needed.
“In the past we have designed our systems around the cow,” said
Mr Cook. “For the future we must design the cow so that we don’t
need the system and if that doesn’t happen the industry will be two
thirds to half the size it is now. Somehow we have got to get rid of that
enormous amount of cost.
“What we have to do is produce the same beef output with no machinery,
no buildings and half the labour.”
Measures which needed to be considered in “designing” the cow
of the future were bull and maternal EBVs, easy calving and vigour in calves,
two condition score units equalled three tonnes of silage, cow size and maintenance,
longevity, temperament and infrastructure.
EBLEX export manager Jean-Pierre Garnier described 2006 as a ‘make
or break’ year for the UK beef industry with four different export
markets to target – cow beef, young bulls, manufacturing beef and the
highest quality beef for prime markets.
“After four weeks we have 25 different markets for meat and live cattle.
There’s a huge amount of opportunities with further developments in
third country markets, including Switzerland which was the first to open
its market.”
EBLEX had been targeting these markets and in particular the best quality
markets to help create better prices for UK producers and to improve the
product’s image abroad. He said the aim was to link up prices with European prices and to add value
to the fifth quarter. By increasing the amount of outlets it would help sustain
prices. |
