Shipping beef out early shapes up cash flow cycle

30 Jun, 2004 10:00 PM

A QUICK cash conversion cycle was an integral part of Graham Laitt's Kimberley pastoral cattle operation that aimed to produce dual purpose cattle suitable for domestic and live export markets.

He began mating Brahman cattle with Red Angus bulls in the west Kimberley to produce Red Brangus cattle, which Mr Laitt said are equally suitable for live export or the domestic market.

Mr Laitt said due to lack of abattoirs in the region northern cattle producers mainly relied on the Indonesian live export market, while Perth butchers did not like the hump in Braham cattle.

He said the Red Brangus was a hardy animal suitable for north west conditions and also had good eating qualities normally associated with the Brangus meat popular in Texas.

The economic crash in Indonesia motivated Mr Laitt to differentiate pastoral cattle operations at Nerrima and Liveringa stations.

"We required a strategy which would enable us to secure alternative markets so we could reduce out dependence on one market, Indonesia," he said.

"When you cannot influence the price the product is to be sold for, you need to manage the price by diversifying your markets, like an abattoir does by sending different cuts to different markets."

Mr Laitt said the value of a producer¹s assets was also determined by a perception of future net cash flows which could only be worked out if producers were fully informed about their markets.

"Our view of the markets into which cattle are sold is largely obscured," he said.

"If you can't see the market how can you determine cash flows? And if you can¹t get a perception of future cash flows, you are in trouble," he said.

Mr Laitt also outlined his Red Brangus weaner operation at the BIAA workshop.

He said the young male cattle were taken off the pastoral stations and sent in purpose-build triple decker road trains to Geraldton properties especially bought for the cattle operation.

"Anything bigger than 1.2m does not get a ride," he said.

So far 3000 cattle had been sent south without loss.

"By crossing in Angus genetics we got a smaller birth weight calf, and we think a more manageable production model for the Kimberley," he said.

Mr Laitt said the breeding capacity on the stations was increased by removal of the young cattle which then became saleable.

"We were lucky if we could get a saleable animal in two years and now we can get a saleable animal in one year, from calving," he said.

"One of the most important things is the time from when you outlay money to the time you draw in the cash, and managing that cash conversion cycle is one of the key parts of this strategy."

Mr Laitt, who is Liveringa Pastoral Company principal and Milne AgriGroup managing director, said he was seeking a premium on the F1 cattle.

He said that when the calves were brought south they also became available for other markets which meant he was no longer dependent on the live export market.

He said the operation was able to get a margin over feed costs by using forage oats as part the cropping cycle at the Geraldton properties.

He was also using a new HiFibe feed fibre pellet developed by his company as a stand alone ration.

Mr Laitt said there was an opportunity to transfer some of the weaker weaner heifers south for first calves and send them back to the station as a backload to cull cows taken off the stations.

He said some of the advantages of the Kimberly was its low land costs and low fixed costs on paddocks where it cost the same to muster 10,000 cows as 1000.

Mr Laitt said the new production model also gave repeatability, made it easier to train staff and prevented crises situations producers were often faced with.

"The cow-calf model accelerates our cash flow significantly and we think the Red Brangus will give us a base to secure a premium and differentiation over time," he said.



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