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Profit periods - how important are they?

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Posted by Brendon Walsh on 30 August 2018

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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!

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Comments

  • I'm sure for many farmers this will be a whole new way of thinking. When to buy, when to sell is not just dependent on the prices in the listings. It is also when the grass is growing at their place, and when the timing of their regular big expenses hopefully doesn't coincide.

    Posted by Sue Edmonds, 31/08/2018 11:24am (54 days ago)