Stocking rate economics
The law of diminishing returns and the fallacy of numbers
More cattle usually means more production in total but some loss of production per head. Eventually, more cattle add no more to total production (or may even reduce it). This effect is magnified by price penalties for slower growth or poorer finish.
Denial of the law of diminishing returns leads to ‘the fallacy of numbers’, that more cattle are always better than less.
Should breeders be stocked the same as steers?
- Overstocking with steers is penalised by market discounts for age or finish.
- Overstocking with breeders may be redeemed to a degree by supplementation but will be penalised by poorer branding rates, poorer weaners, and lower cull cow weights.
- Optimum stocking rates for breeders (adult equivalents per 100 ha) is probably higher than for steers.
Other considerations in stocking rate decisions
- Seasonal risk, especially with breeders
- Keeping options open
- Maintaining resource productivity (for grazing)
- Maintaining biodiversity (not the same as resource productivity though connected).
Resource costs of continual overstocking
Grazing land condition class scores of A (best), B, C, D describe land condition and production capability (see Grazing land management material or attend a Grazing land management EDGE workshop).
Heavier stocking damages pasture plants and changes pasture composition so that over time total forage production diminishes. This deterioration continues if overstocking persists (declining condition class). If not too degraded, partial or full recovery may be achieved by wet season spelling and reduced stocking.
Differences in land condition may be valued using discounted cash flow analysis of future productivity (Breedcow & Dynama) of each condition class. To date these effects have not been factored directly into the analysis of stocking rate research, but their inclusion would favour more conservative stocking rates.
The cattle business and the asset business
Purchasers of land acquire the capacity of the land to produce, the satisfaction and social rewards from owning it, and the prospect of asset appreciation. Only the first produces a cash flow, but the last may be the most important.
Considerations for those comparing stocking rate economics
Breedcow & Dynama is a useful tool for comparing stocking rate options.
Impact of the cost of livestock capital
Each stocking rate increase requires more livestock capital, as cattle are very capital intensive.
Include (interest) cost of livestock capital in a gross margin (GM) calculation to ensure the cost is taken into account in the analysis.
Do cattle prices make a difference?
Relative prices (or values if own cattle) are critical. Purchase price (stores) may differ from sale price (fats), and sale prices for various stocking rates will differ according to age and finish at turnoff weight.
Temporarily depressed prices may lead to heavier stocking rates as owners hold stock against the prospect of a recovery.
Some data from “Wambiana” grazing trial (1997/98 to 2003/2004)
Data from ‘light’ and ‘heavy’ stocking treatments was used to demonstrate analysis of stocking rate experiments using steers. Results of the initial analysis were:
| Per 100 hectares | Light stocking rate (10 adult equivalents) | Heavy stocking rate (20 adult equivalents) | Difference |
|---|---|---|---|
| Adult equivalents per 100 ha | 10.18 | 20.11 | 9.93 |
| Annual weight gain (kg) | 1453 | 2276 | 823 |
| Gain / adult equivalent | 142 | 113 | 29 |
| If discount for slow finish is $0.20/kg | |||
| Value of gain | $2630 | $2203 | -$427 |
| Supplement costs | $58 | $180 | $122 |
| Gross margin | $2572 | $2023 | -$549 |
| GM/AE less interest on livestock capital @ 10% | 1924 | 722 | -$1202 |
| GM/AE | $253 | $101 | -$152 |
| GM less interest/AE | $189 | $36 | -$153 |
| GM less interest/ha | $19.24 | $7.22 | -$12.02 |
| If discount for slow finish is only $0.10/kg | |||
| Value of gain | $2630 | $3154 | $524 |
| Supplement costs | $58 | $180 | $122 |
| Gross margin | $2572 | $2974 | $402 |
| Gross margin less interest @ 10% | $1924 | $1673 | -$251 |
| GM/AE | $253 | $148 | -$105 |
| GM less interest/AE | $189 | $83 | -$106 |
| GM less interest/ha | $19.24 | $16.73 | -$2.51 |
The slower weight gain at the heavier stocking rate, if applied to a bullock production system, would result in a beast finishing approximately one year later (as a four and a half year old bullock instead of three and a half years).
Price assumptions are for a purchase price of $1.80/kg live, a sale price of $1.80/kg for the faster finishing animals (low stocking rate) and $1.60/kg or $1.70/kg for the slower ones (high stocking rate). The $0.20/kg or $0.10/kg discounts for slower finish diminish sales revenue for the high stocking rate treatment.
In the absence of a discount for older finish (not shown), gross margin less interest would be about $700/100 hectares ($7.00/ha) higher for the high stocking rate (an unlikely price scenario).
Written by Bill Holmes, formerly Queensland Government.
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