Steering your business in the right direction

There are several managements strategies or technologies that a beef property manager can consider to determine if they can improve the profitability of their business.

One management strategy that is often overlooked is identifying and targeting the optimal age of steer turnoff. The optimal age of male turnoff on beef properties in northern Australia is driven by the relative profitability of breeders and steers. This in turn, is a function of breeder productivity, steer performance, available markets, and the relative price of steer and female beef cattle.

The Breedcow and Dynama herd modelling software developed by Queensland Department of Agricultural and Fisheries (DAF) economists, can be used to determine the optimal age of steer turnoff (as well as the optimal age of culling females). Analyses conducted over the last 25 years by DAF staff have consistently indicated that the sale of older steers was more profitable than weaners in northern Australia, with the optimal age varying with region and the parameters identified above.

Many breeder enterprises have a business objective to produce as many calves as possible to sell at weaner age although this is always the least profitable age of turn off for the business. Analyses for a Central Queensland property (8,700 hectares, with a carrying capacity of 1500 adult equivalents) using long term cattle prices (average price received between July 2008–November 2015) showed that sale of 1-2 year-old steers was the optimum, but there was little difference to producing 2-3 year-old steers (Table 1).

Table 1 – Change in herd structure and gross margin with age of turnoff for steers on a Central Queensland property

Table 1 sourced from the Fitzroy Beef Production Systems Report. For more information regarding optimising age of turn off or other strategies designed to improve profitability and resilience of beef and sheep businesses in Queensland, click here.

The relatively lower profitability of weaner production systems is still true even in today’s current market. Based on the last three-and-a-half years of price data, weaners would still need to consistently receive a significant price premium of at least $1/kg liveweight above the price expected for the optimum sale age of steers to make weaner production more profitable than holding weaners for an additional 20 to 24 months.

The lower the relative performance of the breeder herd, the more likely it is that older ages of steer turnoff will be optimal. Breeding herds targeting the sale of slaughter weight steers have remained the most profitable strategy over recent years for many north Queensland beef producers, even though the prices for live export steers were quite attractive.

The improvement in the profitability of a beef business when moving from a weaner age of turnoff to the optimal, can be substantial. In an analysis for a Northern Downs property (16,000 hectares with a carrying capacity of 2000 Adult Equivalents) an extra $71,100 profit/annum was added as a result of moving from a weaner age of turnoff to sale of 31-month-old steers  However, holding the steers back until the later sale age could cause a significant short-term impact on the property’s cash flow ($122,100 less in this example) and could provide an obstacle to some managers when considering this strategy.

A reduction in breeder numbers with older ages of turnoff provides an added benefit in improving the drought resilience of the beef business. When conducting these analyses, the grazing pressure on the property (total number of adult equivalents run) is held constant. Therefore, moving from a weaner turnoff production system to one producing older steers will decrease the size of the breeder herd on the property. This improves drought resilience because breeders have greater nutritional demands related to reproduction, and therefore require more complex and expensive management interventions for heavily pregnant cows or cows with small calves during dry periods and drought.

If you are interested in finding out more, please contact your local beef extension officer and they can help you to conduct a whole herd comparison using the Breedcow and Dynama herd budgeting software. This will identify the optimal age of steer turnoff for your business by comparing the herd gross margin (less interest on livestock capital) for different ages of turnoff.  The analysis will also identify profitability and cash flow implications of moving from your current age of steer sale to alternatives.

Watch this video to see how else Breedcow and Dynama online herd budgeting software can do for you.