Sheep and beef farm profit is not margin or gross margin. I talked about this in my last blog - I hope you saw it! Let me summarise.
Animals create profit by increasing in value over a time period more than the cost of the dry matter eaten (DMe) over that same time period. Consequently, there are times when they are changing in value more than the costs, and times when they are changing in value less than the costs or dropping in value. This example from my last blog shows that well.
These are some yearling bulls of a client about 3 years ago. With true profit measurement we found that the first 2 months of the year was a definite loss period: -22c profit/kg DMe. The middle period of the year was very profitable: 23c profit / kg DMe. The last 3 months were only just loss making: -3c profit / kg DMe. Overall for the year, they averaged out at 5c profit / kg DMe.
This shows there are profit periods and non-profit periods. If profit periods are the times when animals create profit, wouldn’t it make sense to know those periods for all of your stock classes? Imagine knowing that - how might you make decisions on-farm to actually bring that spare cash in to your bank account? Makes you think doesn’t it! Let me show you the next step.
By viewing the true profit per kg DMe for any stock class on a weekly basis (after a share of all expenses have been allocated), you can identify a run of weeks where profit is created. Our Growfarm clients see this information automatically in ProfitLIVE® - our live online profit measuring and forecasting tool. Put those times onto a Growfarm Season Plan and you begin to develop quite a powerful picture. I say powerful because you can start to see how to construct your business and its operations over the year, to bank profit.
Keep in mind these are the periods when these animals are profitable, not the only time you would necessarily run them, although you might only run them then because you do have that option.
The point is, that is when they are delivering for you.
Now, have a look that picture. Please know that different farmers can have different season plans depending on the effect of different factors, such as grass growth patterns, their local markets, suitability of their land for certain stock classes and not for others, and so on. This is just one example, and yours may differ. However, the principles are exactly the same.
What do we do with this picture now? How important is knowing this information? I’m going to leave you to consider these questions. I’ll come back on my next blog to talk about how you can use this information to lift the profit of your sheep and beef farm business. No doubt you will have some ideas - here’s my email address if you wish to let me know your thoughts. I’d love to catch up on what you think.
Until then, all the best! I’ll catch you again soon!
accurate thinking achievement action adversity all blacks autumn beef benchmarking business business operational literacy business owner business owner thinking business strength change client client masterminding cobalt communities community complimentary ebook compulsory levies confidence conversion of pasture into profit disruption doing what it takes do what it takes economy engage events failure family farm farm business farm business cycles farm business iteracy farm business profit farm business results farmer farmer attitude farmer confidence farmers farming farming for profit farm profit farms farm systems financial literacy focus funding generate governance growfarm growfarm season plan habit change kiwis legacy livestock livestock farming loyalty mistakes money nz economy older farmers ownership pasture pastures planning positive farmer attitude price makers pristine environment production productivity profit profitability profitable farming profit and sustainability profitlive profit methods profit on purpose profit periods profit principles profits profit vs income protein risk riskiness rural rural professionals sales scale sheep sheep & beef farming sheep and beef sheep and beef farm sheep and beef farming sheep and beef farm profit soil spare cash strategicplan strong farming industry success succession sustainability take control target pasture covers teach team topdressing unlock potential vision win/win work with nature young young farmers