Cow-calf systems, weaning rates, and live weight produced per cow are factors that have affected the efficiency of Australian Beef Producers in 2016, but they aren’t the only factors at play. Australia has led the worldwide industry in terms of profitability, and much can be said of how they manage to achieve these levels, though it is not without its opportunities for improvement. A closer look at some of the key elements of the industry, such as labour costs, production, and diversification will help to ensure continued long term profitability of Australian systems.
AREAS FOR IMPROVEMENT
Since northern Australia has more rainfall than many other cattle raising regions, such as Canada and Montana, it is able to keep pace with the higher production typically found in Europe or South Africa. Reproductive rates worldwide on average tend to be around 90 calves per 100 cows, but the rate in northern Australia is only about two thirds this rate, leaving significant room for improvement assuming costs and other factors remain constant. Australian production in terms of kg live weight produced per cow per year falls in the range of 104kg to 340kg lwt, compared to the worldwide production rates of 100-480kg lwt, another potential area for improvement.
Australian beef prices, while competitive with much of the world, could also be improved when compared to North American and European prices. Australia is unlike Europe when it comes to cattle raising, as Animal Fencing, in that government intervention has maintained much of the European industry. Revenues were comparable to Argentina and Uruguay, with Australian revenues increased in 2016 over those of 2015.
COSTS OF PRODUCTION AND LABOUR
Cow-calf systems in Australia remain low compared to countries such as Canada and the Ukraine, with an exception in 2016 when there were high animal purchases which followed draught in the years before, leading to a need for increased herd sizes. While much of the world has worked to reduce their cost of production, achieving reductions as significant as 5% (Europe being the exception with an increase of around 20%), Australian costs have been maintained at some of the lowest costs worldwide. This consistency has been maintained mostly in the south of Australia, where costs have been reduced dramatically, while northern producers saw increases to their costs.
Since labour costs were approximately $20 USD per hour, costs in Australia were high compared to most of the world. Although this high comparative cost remains to be the case, the cost level did fall year over year, and given the levels of production achieved in Australia, the cost per kg of live weight is comparable to averages worldwide. Non-factor costs tend to be more similar to North and South American systems than to those of European countries, which tend to be around twice the Australian costs.
HOW PROFITABLE HAS BEEF PRODUCTION IN AUSTRALIA BEEN?
With only 40% of the world’s farms maintaining long term profits, where does Australia fit in? The good news is that Australia is one of the few countries where farms do maintain long term profitability. Calf-cow operations were profitable in two thirds of Australian farms, reaching record profits in 2016. Returns increased significantly as well, by 30% or more, contributing to the increase in profits since costs were held steady. Compared to Europe, where costs tend to be much higher, Australian farms performed exceptionally well, keeping costs at less than half of those related to European cattle raising.
Since Australian farms keep up a balance of systems, they are well positioned to maintain their enterprises, because if cow-calf systems underperform, they have finishing systems to fall back on, and vice versa. Northern systems maintain relatively lower rates of productivity, for several reasons including lower weaning rates, and lower reproduction and growth rates. Australia has seen a 30% improvement in returns though year over year, between 2016 and 2015, which has been helped along by southern Australia’s maintaining of costs, offsetting the increase in Northern Australia. This took profits in 2016 to their highest level in many years, with long term profits being maintained in two thirds of Australian farm systems. The higher labour costs seen in the Australian industry, while heavily influenced by exchange rates, are balanced by the higher level of production.