AS producers across the State turn their minds to seeding, many have also been thinking about how to make their cropping programs and livestock operations integrate more effectively.
Recently teams from Farmanco have been out and about sharing Meat & Livestock Australia (MLA) benchmarking data from a national survey of mixed enterprise farmers to demonstrate where the avenues for improving profitability are.
Attendees at the profitable integration of cropping and livestock workshops recently presented in places including Moora, Pingelly, Dowerin and Kojonup were given a business shapshot of the producers who participated in the MLA benchmarking survey, which took place between 2013 and 2016.
The focus of the workshops was on the top 20 per cent of the most profitable producers which were compared to the remaining 80pc of their peers throughout the workshops, with the gaps and differences in their operating costs and priorities demonstrating the areas in which a management change could make a significant profitability difference for the average mixed enterprise producer.
Those who attended the workshops included producers, consultants and students, all keen to fill gaps in their knowledge about putting cropping and livestock together effectively.
Farm Weekly attended the last workshop in the series which was held at Kojonup last week where Farmanco’s Richard Brake, James Macfarlane and Stacey Bell gave presentations.
One of the key points made throughout the workshop was about the misconception that total cropping operations are more profitable than mixed farming enterprises.
“There is a lot of misinformation out there – 100pc croppers are not necessarily more profitable than mixed farmers,” Mr Brake said.
“There are certainly challenges associated with running a multi-focused enterprise, but profitability ultimately comes down to the management of both sides of the business.”
Demonstrating ideas through benchmarking data isn’t a new concept, but it certainly makes looking through charts and graphs more accessible when it is clear the figures related to the top 20pc of producers aren’t made up numbers, but rather a group of producers actually performing in the top 20pc profitability wise and achieving the figures on the Powerpoint screen.
Establishing the figures on screen during the workshop as achievable goals for mixed-enterprise producers, the presenters looked at what the key drivers of profit can be.
Identifying ways to optimise gross margins, utilise low cost models while managing people and risk effectively came up as those key profit drivers.
Mr Brake said though it might be easy to over-complicate a multi-faceted farming enterprise, simplicity is the key to a successful cropping and livestock business.
“Just keep it simple, effective and efficient,” he said.
“This is one of the main things the top 20pc of producers are able to do.”
Mr Brake and Mr Macfarlane discussed the key principles behind an effective low cost business model with the main driver of both the cropping and livestock sides of the business being asset utilisation (including machinery, labour and land).
From the discussion on labour came one of the major differing factors between the top 20pc of producers and the rest, which was people and time management.
“This was probably the biggest difference between what the top 20pc of producers are doing in comparison to the remaining 80pc of producers,” Mr Brake said.
“The top 20pc effectively implement new practices and new ideas quickly, they up-skill their workers, they make sure the equipment their staff are using is well-maintained and modern so they can be as productive as possible.”
The presenters also noted the value of looking at the personal strengths of the people at the head of a business with the results from a qualitative survey conducted by Farmanco.
It showed the top 20pc of producers demonstrated management characteristics including the ability to prioritise critical tasks, to be accountable for key business decisions, flexibility within the business plan, effective decision-making skills, effective time management of essential tasks and a strong desire to integrate cropping and livestock enterprises.
The significance of an effective workforce came up regularly throughout the workshop, as did the importance of time management.
“Timeliness is crucial,” Mr Brake said.
“If you’re running a mixed enterprise, you need to be able to allow time within your livestock operation to focus on the cropping side of the business when it needs the focus in order to be profitable, for example, during seeding.
“But also don’t get hung up on what other people do – if you have space in your business for a livestock manager and a cropping manager and can afford to be shearing during harvest or crutching during seeding, then by all means do that.
“But it is absolutely crucial to be able to prioritise the time sensitive sides of your on-farm operations in order to be profitable.”
Mr Brake said the top 20pc of producers were good at managing their time but also “light on their feet” when it came to the layout of their year-to-year operations.
“Flexibility can play a big role in profitable integration of cropping and livestock operations,” he said.
“Markets aren’t fixed and neither should the set up of your operation be.
“If you can make the most of opportunities in the market when they arise, that’s when you’ll be looking at additional profit.
“For example, if I have space in my enterprise to be able to keep an additional mob of ewe hoggets when the wool and sheep markets are strong, then I can take advantage of those market opportunities, in the same way that I might decide to alter my cropping program if it doesn’t rain when I need it to around seeding time.”
Mr Macfarlane spoke more about the livestock side of things during the workshop and it became clear the top 20pc of mixed enterprise producers spend more money in their livestock businesses then their peers.
“Key indicators for gross margin optimisation in your livestock business include setting up your stocking rate to target 1.5-2 Dry Sheep Equivalent/hectare/100 millimetres of annual rain, optimising weaning percentages, adult fleece values and heavy grassfed turn off weights,” he said.
“But perhaps the most interesting thing to take away and certainly one of the more controversial points to note, is that the results of the survey showed that profitability doesn’t necessarily have a strong correlation to high stocking rates.
“The results came up on a scatter chart which just shows that so many factors play into the profitability of a multi-enterprise, not just the number of sheep you can run.
“It’s more about setting a sustainable stocking rate, understanding your environment and managing your business effectively.
“Those key indicators also factor into where we see the top 20pc of producers spend money on their livestock operation to make money.
“Investing in the livestock side of your business will help you get to goal weights, weaning percentages and dollar values down the line.
“But also focusing on details such as mob size, shelter paddocks during lambing, keeping up condition scores and harsh culling will have a positive impact on the productivity of your livestock operation.”
The presenters gave attendees a target to aim for with their sheep enterprises which has been determined to be the profitable sweet spot, which was 120pc weaning:$120/head:$60/head adult fleece value.
Further key indicators for best practice integration of both cropping and livestock were given as being able to retain 30pc of turnover as net profit, having fodder crops sown and seeding completed by set dates, operating with a legume based pasture phase, keeping variable costs at less than 50pc of turnover and total plant, machinery and labour costs ideally at 25pc of turnover.
“If you’re not achieving that, then it’s all about improving management, management, management,” Mr Brake said.
The workshop finished up with a group discussion on the positives and negatives behind running both livestock and cropping enterprises within the same business.
The list of positives was long, as was the list of potential negatives which largely recognised the need for good overall business management in order for an integrated cropping and livestock business to be profitable.
As many producers know, sheep can help with weed management, stubble utilisation, disease control, moisture retention and soil health in a cropping enterprise, though if not managed closely, can also create weed issues, impact on time sensitive parts of the enterprise and stretch the workforce too thin.
So though the workshop discussed a lot of interesting data on where the top 20pc of producers spend their money and effort within their mixed enterprises, it was clear by the end of the day that effective management right through the cropping and livestock businesses was the principal factor in running a profitable mixed enterprise.
