Key comparisons between top and bottom performing beef and sheep farms

There are eight key comparisons between top and bottom performing beef and sheep farms, with related case study examples from either quartile to provide real-life examples of actions farmers are taking. 

• Economic Size
• Fixed and variable costs
• Tenure
• Unpaid labour
• Stocking rate
• Diversification
• Contract rearing out
• Proportion of fatstock

Farming is a commodity business. Amongst other things, this means margins are usually slim. This is particularly true for beef and sheep farms where stock may remain on farm for a long time before its value is turned into cash. So, to make a profit, the number of units must be high.

Keep a focus on how to raise output, without sinking considerable additional costs into the business. Think how you can you add another unit (suckler, finisher, breeding ewe etc) into a system, without changing the system or adding to overheads or workload. Similarly, recognise that good, large businesses become good first, then large. A poor business will not simply become profitable by taking on more land, stock, costs, debt and worry. Get the system right and then look to scale up.

“Mark’s sheds are homemade that he and his neighbour built some years ago. He is very proud of them as they were so cheap, being made from reclaimed materials; spare telegraph poles roofed with corrugated tin sheets he had behind an old garage. The roofs sit high on the sheds and enclosed walls mean they don’t have much air flow. This, combined with the corrugated tin that can be an issue for condensation rather than the more modern fibre cement roof, means the sheds are stuffy and humid. Mark sees calves struggling with pneumonia and does call the vet regularly to treat the poorer calves. This is costly. These calves never seem to fully recover and grow to their full potential.”

Flood Farm, Bottom Performer

Costs need to be kept inherently low, and only spend money on something where a return is likely or inevitable. This is usually in the production costs rather than overheads.

Top performing farms spend significantly more money per hectare on seed, fertiliser and grassland sprays. Spending money on improving the quality of grass pays dividends. Consider yourself a grassland farmer as much a livestock farmer. Top farmers spend a lot more money per hectare on grassland costs and get a lot more out of their number one resource.

Poor performing farms have proportionally more machinery. It is one cost where large businesses benefit over smaller ones, being simpler to utilise a machine more fully. No farm machine is utilised completely efficiently. However, there are clever ways to get jobs done, even on small farms, often with contractors, which are usually cheaper than buying and operating machines.

“Sam re-seeds a minimum of 10% of his grassland every year. Regular soil sampling gives him the ability to ensure pH is at the correct level as well as knowing which fields to spread manure on to improve the P and K levels. ”

Top-End Farm, Top Performer

As larger farms are likely to be more profitable, that means that a good small-scale farmer is likely to want to grow. The ability for small farmers to simply buy land is not great, partly because not much land is sold in the UK, and secondly, because small farmers might not have the financial resources to purchase additional hectares at short notice. Thus, many farmers take on rented land. As long as the cost of taking the land on is comfortably outstripped by the overall additional margin of occupation, then there is a margin in it for you. Not all available land will add to the profitability of your farm so work out the viable rent for all the possible fields in your area.

“The value of these calves is low as there isn’t a great demand in the area for dairy bull calves and like the suckled calves they don’t grow as well as they should. This was manageable when input prices were lower and Mark was falsely lulled to think the enterprise was an easy win. He has since considered keeping the calves longer, but he does not have the space and would require building another shed for them over the winter. He doesn’t have the capital to invest in further buildings. This does also leave the farm at risk should they go down with bovine TB”

Flood Farm, Bottom Performer

As you grow, you cannot do everything yourself. You may have family help which is usually useful, although can be challenging to manage, a salaried person is often easier to direct than a volunteer or a loved one. Paying for good staff gives you a different working relationship to unpaid (often family) labour. Whilst they may be less personally engaged with the farm, they may work more efficiently on the jobs that generate a return rather than those most enjoyable.

You can manage paid staff differently, they have set hours so can not do everything, and will therefore do those jobs with the greatest economic return. Paying for staff also gives you the opportunity to do more of other things yourself, either building the business on the farm or earning a good wage elsewhere.

If there is a benefit of increasing the amount of sales for the market, then consider land as another resource and look to become more efficient with it, i.e. generating more sales per hectare. In other words, a higher stocking rate increases the farm size (measured in output) whilst spending less on rent or land occupation costs. Calculate how much consumable meat is generated per hectare of your farm per year.

“The cattle are kept in two systems, the first is an indoor system into which he buys around 600 young cattle per year. The second is a grazing system which he purchases about 400 stock per year. Under the indoor finishing system, these are kept on farm for around 100 days. He started looking at the indoor option after considering ways of making better use of the sheds that were on the farm that had historically been used to house suckler cows. The sheds would stand empty for 6 months of the year.”

Top-End Farm, Top Performer

Taking on another enterprise sounds like a solution to all the farm’s economic problems. It also sounds like a challenge and a lot of fun. It might be all of the above. Equally, it might be the distraction that takes resources from the main farming enterprise, probably including management, possibly other resources too such as labour, land or capital.

Good farm managers usually turn out to be good diversification managers, as many of the required skills overlap. But think carefully before taking on another enterprise whether you have the skills, energy, dedication and commitment to do something else.

“Sam has recently sown some herbal leys to prepare for the SFI as he thinks this might be the best route for the farm to secure funding. It could also reduce the worm burden with these being a natural anthelmintic. He also suspects the leys will offer more drought tolerability with many of the varieties being deep rooted.”

Top-End Farm, Top Performer

Better farmers do more of it. This is a kind of specialisation in effect, passing the role of contract rearing to third parties. It might be considered as the opposite of diversification. Within that, the logic fits in this farming system.

This is a technical point regarding the balance of enterprises. Higher performing farms have more fatstock, which might be a land quality point. It might also be that some farmers have found keeping finishing stock more profitable than keeping breeding stock (which tend not to earn any direct income).

“He purchases the cattle for indoor finishing at a weight of between 450-500kg. His target sale weight is 625-675kg meaning they have 100 days to put on 175kg, a target daily liveweight gain (DLWG) of 1.75kg each. To break even in his system, Sam knows they need to achieve 1.2kg DLWG. This gives him a strong buffer between what he needs to break even and his target DLWG. As this is an important measure of financial success, the cattle are weighed every week. It takes a lot of time but using this information Sam correctly identifies which animals are ready for sale.”

Top-End Farm, Top Performer