Beef producers on King Island are reporting above-average labour efficiency.
According to a Farming Together-funded benchmarking study, the island farmers paid more than a control group for fertiliser and markedly more for freight/selling, but the study found overall cost of production was only 1% higher, and this difference was recouped by higher income/DSE.
A benchmarking group of 10 businesses found labour efficiency ranged from 18,000 DSE/labour unit to 6000 DSE/LU.
Farming Together-appointed advisor John Francis from Holmes Sacket led the benchmarking study from October 2017 to April 2018, using 2016/17 data.
The farms, a mixture of family and corporate-owned, ranged in size and land use.
Overall, compared to the Holmes Sacket average, the King Island producers reported good labour efficiency.
The exercise has also raised the possibility of a land-use study to boost farm margins.
Ana Pimenta, of the King Island Natural Resource Management Group, explained: “We carefully analysed the financial data and key performance indicators for all 10 businesses allowing for comparison against every other benchmarking participant in the group and against the Holmes Sackett average and top 20% producers.”
Compared with the Holmes Sacket 16/17 average, the group’s average cost of production ($/Kg lwt produced) was 1% higher and the average cost of fertiliser ($/DSE) was 51% higher.
Freight/selling costs were markedly higher. The group paid an average $4.34/DSE compared with $2.79/DSE from the broader Holmes Sacket group.
“The average farmer on King Island runs 1500 head of cattle, this represents $23,250 annual loss to each business,” said Ana. “For the whole of King Island this represents an extra cost of at least $1.55m to our industry.”
Despite additional costs, the profit of the King Island group suggests that these costs are not affecting profit per DSE, due to an additional income $/DSE for the KI group.
The production/ha, ranged from 24.2 to 56.6 (kg lwt/ha/100mm). Ana said: “The upper limits on production were evident in the heavier country but less so on the coastal and semi-coastal. Establishing a land-type index could help establishing the relativity of production of coast land compared to heavier country.”
The Farming Together farmers also benefited from a visit to Flinders Island February 2017. “We networked with the 15-year-old benchmarking group there to understand the long-term benefits of benchmarking.
“Overall, I see this as a great opportunity for King Island businesses,” she said. “The data analysis shows that, most producers in our group have the capacity to be more profitable by implementing just a few changes to their business.”
Farming Together program director Lorraine Gordon (pictured) said: “The study set the benchmarks for this group of beef producers. It showed them their profitability gaps and possible gains.”
This story was first published in The Fence magazine.