By Angus Brown | Source: LFMP, MLA, Mecardo.
The Agriculture Victoria Livestock Farm Monitor Project (LFMP) results for 2017-18 have recently been released and the cattle numbers are a good reflection of price movements and seasonal conditions. Despite the issues faced throughout 2017-18, there was still good money in beef production.
The LFMP analyzes data from 77 sheep and cattle properties across Victoria. The full report can be found here and along with a detailed summary, it has a lot of data in its appendices.
There is all sorts of data we could analyze, but the main areas of interest are gross margins. Gross margins will obviously vary with prices and seasonal conditions. This year seasonal conditions have seen strong variations for cattle enterprise gross margins between regions.
Figure 1 shows the gross margins per hectare per 100mm of rainfall. Western Victoria was the standout, with the figures in the report even higher than those on the chart. There was one farm which achieved a gross margin of $1617/ha/100mm of rainfall. This was around $1,300 better than the next best, so we took it out as it skewed the chart markedly.
As usual, the top 20% of enterprises easily outstripped the average results as those businesses were highly profitable. The state average Earning Before Interest and Tax (EBIT) for cattle came in at $341/ha. It was up 19% of 2016-17 and at a record high.
We can see in Figure 2 that Western Victoria bucked the trend, with real gross margins setting a new record of $715/ha. Western Victoria couldn’t knock off Gippsland’s record from 16-17 of $833/ha but it did perform better this year. This was partly due to the skewing impact of the very strong trading enterprise and seasonal conditions. Looking purely at gross margins doesn’t take the dry autumn and spring experienced by Northern Victoria and Gippsland into account.
Despite gross margins falling 9% and 27% in Northern Vic and Gippsland respectively, Figure 2 shows that beef producers in these areas still had close to their second best year on record.
Key points
* The Victorian Livestock Farm Monitor Project show beef enterprises were still highly profitable in 2017-18.
* Western Victoria hit record gross margins per hectare, while other regions were down but historically strong.
* Profitable beef enterprises suggest breeding and store cattle will get expensive when the season turns.
What does this mean?
With the prices of 2017-18, cattle producers were still seeing levels of profitability they hadn’t experienced in the past 45 years, at least until 2015-16. The fact that Victorian cattle enterprises are still looking highly profitable, at least against historical levels, suggests that the herd rebuild should gain momentum when the season turns. This adds weight to the theory of very strong breeding and store cattle values and a return of the Eastern Young Cattle Indicator to 600¢/kg cwt or more.
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