The Economics of Beef in Central Queensland

The economics of beef in Central Queensland

GROSS MARGINS AND PRODUCTION NOTES

Department of Primary Industries and Fisheries Glossary of terms & deﬁnitions

AE Adult equivalent. A method of comparison between animals of different feed requirements with a recognised standard of a single adult animal feed ration, the international standard being a single non-pregnant, non-lactating animal of 455 kilograms live weight (kg Lw). BMP Best management practices. Those management policies and practices recommended as most efficient and effective in production. CQ Central Queensland. Broad geographic region of eastern Queensland centred on the Tropic of Capricorn including the Rockhampton, Emerald and Biloela regions. DW Dressed weight (kg). Weight of animal carcass following dressing. EBV Estimated breeding value. The genetic potential of known production traits within an animal. EU European Union. An economic federation of European nations, known formerly as the EEC (European Economic Community) and the EC (European Community). Important as a premium, high value market. HGP Hormonal growth promotant. Anabolic substance used to promote more rapid growth of cattle, producing higher weight gain at younger finished ages. HSCW Hot standard carcass weight. Weight of skinned, pre-boned animal carcass prior to chilling. kg Kilograms. Standard unit of measure. Lw Live weight (kg). Total weight of animal at any stage of growth and prior to processing. y.o. Year/years old. Age of the animal taken from time first born.

Acknowledgements

The author acknowledges the following DPI&F staff for technical support and assistance into this publication:

Mark Best – Principal Author Ross Dodt Ken Murphy Jillian Aisthorpe Peter Donaghy Vic O’Keefe Terry Beutel Bill Holmes Susan Robinson Fred Chudleigh Karl McKellar

While every care has been taken in preparing this publication, the State of Queensland accepts no responsibility for decisions or actions taken as a result of any data, information, statement or advice, expressed or implied, contained in this report. © The State of Queensland, Department of Primary Industries and Fisheries, 2007. Inquiries should be addressed to: Intellectual Property and Commercialisation Unit Department of Primary Industries and Fisheries GPO Box 46 Brisbane Qld 4001 or [email protected] Tel: +61 7 3404 6999

2 The economics of beef in Central Queensland Contents

Glossary of terms and deﬁnitions ______2

Acknowledgements ______2

1 Introduction ______4

Central Queensland region ______4

Land types ______4

2 Property modelling ______6

Gross margins introduction ______7

Gross margin sensitivities ______7

Market speciﬁcations ______7

3 Property proﬁles ______8

Coastal speargrass store weaner production model ______8

Coastal speargrass breeder/store steer production model ______11

Brigalow Breeder (EU) ______14

Brigalow bullocks trade (Jap Ox) ______17

4 Production notes ______18

Herd parameters ______18

Herd bull ratio ______18

Husbandry practices ______18

Additional assumptions ______19

Appendix 1 Land type descriptions ______20

Coastal speargrass land types ______20

Brigalow land types ______23

Appendix 2 Variable cost inputs ______25

Appendix 3 Sale price derivation ______26

Web linkages ______27

Bibliography ______27

The economics of beef in Central Queensland 3 1 Introduction This booklet contains technical production, water holding capacity determines potential market specific and economic information productivity from improved pasture species. common to extensive beef production systems Coastal speargrass and Brigalow land types of Central Queensland (CQ). Representative feature prominently in CQ beef production property models are used to generate farm land types3. Figure 1 maps noteworthy enterprise estimates. Cost structure and Brigalow and Black speargrass regional market price information is applied in order to ecosystems throughout CQ. establish gross margin profitability estimates. The intent of the document is to provide Coastal speargrass representative gross margins for selected beef Coastal speargrass land types are typified production systems across CQ land types. by a mixed range of landforms including mountains, ranges and alluvial plains. Typical Central Queensland region tree species in coastal land types include various gum-topped box, swamp mahogany, Central Queensland includes the area teatrees, bloodwoods and a large diversity surrounding Rockhampton and extending of eucalypt species including poplar gum inland as far as the central highland region and ironbark. Typical pasture species include around Emerald. CQ beef production systems native sorghum, golden beard grass, giant typically centre on Brigalow1 and coastal and black speargrass and native legumes. speargrass2 land types. Coastal production Introduced species commonly used for systems are found in a narrow strip extending pasture improvement include Pangola grass, along the coastline from Rockhampton to Rhodes grass and Bisset creeping bluegrass. north of Mackay. The brigalow belt extends Commonly utilised legumes include seca and inland of Rockhampton, includes the Dawson verano stylo, wynn cassia and leucaena. Due and Callide Valleys, sweeps west through the to much of this land type being unsuitable Springsure area and extends north towards the for finishing stock, the trend has been for Townsville region. this area to produce store cattle suitable for Land types finishing or backgrounding on fertile land types (Murphy, 1995) or more recently in Land type influences the productive capacity feedlot operations. of extensive grazing operations. The land Utilisation rates4 vary depending on the type of a property effectively determines the fertility of the country. The utilisation productive capacity and development potential recommendation (i.e. the amount of total for that property. Land types typically forage load consumed through sustainable demonstrate different grass species, soil types grazing) for this land type is around 15% of and associated carrying capacities as well annual pasture growth. as different recovery periods from grazing. Further, because different pasture varieties suit Detailed information on coastal speargrass different soils, inherent fertility coupled with land types is provided in Appendix 1.

1 Acacia harpophylla 2 Including Black speargrass, Heteropogon contortus 3 Although used here in the context of a general description of land type, it is acknowledged that Central Queensland beef cattle properties typically consist of some mixture of other land types. Examples of other land types include Desert uplands and Downs type country. 4 Utilisation rate is the proportion of annual pasture growth consumed. Excessive utilisation adversely affects the capacity of the pasture to convert water and nutrients into growth, thereby having detrimental impacts on sustainability. Source: Chilcott, et. al. (2005)

4 The economics of beef in Central Queensland Black speargrass

Brigalow

Figure 1: Brigalow and Black speargrass regional ecosystems (see inside front cover for colour map)

200 100 0 200 Kilometres

Source: Map derived using Version 5.0 of queensland regional ecosystems mapping (www.epa.qld.gov.au/nature_conservation/biodiversity/regional_ecosystems/introduction_and_status)

Brigalow Brigalow land types are typified by undulating to generally good soil fertility and high water scrub plains. Brigalow is typically found in holding capacity, developed Brigalow country association with blackbutt, wilga, yellowwood, is broadly considered as prime finishing belah, bauhinia and poplar box tree species. country. Native grasses include desert Mitchell, forest The recommended utilisation rate for the bluegrass, Queensland blue and kangaroo sustainable use of Brigalow country is grasses. Rhodes grass, buffel grass, green estimated at around 30% of annual pasture panic, purple pigeon and creeping bluegrass production. are widely used pasture improvement species. Butterfly pea, caatinga stylo and leucaena are A detailed Brigalow land type description is used as legumes for pasture improvement. Due provided in Appendix 2.

The economics of beef in Central Queensland 5 2 Property modelling Representative models of typical grazing a bullock finishing operation. Purchase and enterprises were developed on information sales weights and prices were inputted. Other gathered from existing publications, local required inputs included dressing percentage, census data and technical specialists. mortality rate, variable costs per head and Beef extension staff were consulted for interest rate. The program calculated gross husbandry and herd management practices margin per head, gross margin per adult typical within the region. Both breeding and equivalent, gross margin per head less interest, trading scenarios were modelled. Estimates gross margin per adult equivalent less interest of biological production factors including and percentage return per year on capital weaning, death rates and bull mating ratios investment. were combined with estimates of herd The use of adult equivalents to estimate husbandry costs to produce each of the carrying capacity requirements allows representative farm models. comparison of results between different For assessing relative returns a number production systems. In order to account for of enterprises, based on land type5, were the forage demand of the herd, allowances modelled. These included: are made for each animal class, according to the breed, weight and lactation status of the 1. Coastal speargrass land type operations animal. An example is the relatively higher a. Breeder weaner turnoff forage requirement for a lactating cow. All b. Breeder store steer turnoff animals within the herd are assigned values in proportion to the feed demands of an adult 2. Brigalow land type operations maintenance ration. In this way limiting a. Breeder EU steer turnoff factors of production including land type b. Jap Ox finish and herd feed requirements are accounted for when comparing different herd structures and The Breedcow programme of the Breedcow grazing strategies. and Dynama Herd Budgeting Software Package (Holmes, 2005) was used in modelling selected The value of livestock capital is the total breeding herd structures. The programme was value of the retained herd. The opportunity used in estimating optimal adult equivalent cost7 of holding that stock has been estimated numbers and gross profitability. by using a notional interest rate of 10 per cent and is termed the opportunity cost of Breedcow allows changing of parameters livestock capital. By including the opportunity for each operation. Breeder mortality rates, of livestock capital in an economic analysis, weaning rates and sale prices were altered the economic returns from different herd to assess changes on overall profitability. structures, with differing capital requirements, These parameters were changed within the can be compared. model to derive sensitivity matrices. Current market prices were obtained from commercial Thus, the use of adult equivalents and operators and saleyards and applied to models. accounting for the opportunity cost of maintaining a particular herd structure, allows The computer programme ‘Bullocks’6 was for direct comparison of gross margins across used to model the gross margin returns of different land types and herd structures.

5A land type is commonly viewed as a distinct geographical area with distinct land forms, native vegetation and grass species 6‘Bullocks’ is one of nine programs contained within the Breedcow and Dynama Herd Budgeting Software Package. 7Using that capital invested in cattle for some alternate use such as loan repayment or alternate investment.

6 The economics of beef in Central Queensland Using adult equivalents to account for feed stock, for further growing out or immediate consumption differences among animal sale. A reduced rate of breeder mortality will classes, allowing for differing capital mean higher numbers of retained breeders requirements according to herd structure available and a reduction in the requirement (influenced mainly by age of male turnoff), for replacement weaner heifers to cover allows fair comparison of gross margins breeding herd attrition. Again, sales turnover across different herd structures. would be expected to be increased as more animals are available for sale. Prices obviously Selected output for each operation was have gross margin impacts by directly summarised and is presented in table form8. changing the income stream from cattle sales. Information includes herd structure, cattle numbers, adult equivalencies, herd valuations Market specifications and gross margins less interest cost9. Meeting product specification within the Gross margins introduction selected market enhances supplier reputation for supplying quality product and is critical The gross margin for an operation within in achieving price premiums. Markets define a stable herd structure is equivalent to the preferred product requirement in the form gross income received less the variable costs of market specifications. The ability to incurred. Variable costs are those directly meet market specifications results in the attributable to an individual animal which maintenance of producer premiums for vary in proportion to the size of the operation. marketed product. Market specifications for Examples include animal husbandry and European Union (EU) and Japanese Oxen (Jap marketing expenses. Ox) cattle classes are outlined in section 3. Gross margin ratios have been calculated against limiting resource inputs. Gross margin per adult equivalent (AE), giving an indication of gross margin per beast area, enables comparison between different land types. Gross margin sensitivities

Each gross margin has an attached sensitivity table. The table offers an indication of the effect on gross margins of changes in herd composition parameters and/or pricing. Examples of herd composition changes modelled include breeder mortality and weaning rates. Live weight prices vary the gross margin return and therefore the choice of market is critical to achieving higher returns. Both breeder mortality and weaning rate affect total herd numbers. The achievement of higher weaning rates will mean that there are higher animal numbers available to the herd – animals available for use as either replacement

8Small discrepancies may exist between cost and sales summations and breakdowns due to rounding. 9In reporting gross margins less interest, the effect of holding higher valued herds has been accounted for.

The economics of beef in Central Queensland 7 3 Property proﬁles

Coastal speargrass store weaner Month Husbandry practices/activities production model JAN Mating FEB Mating The coastal speargrass store weaner model is based around a breeding herd of 800 adult MAR equivalents (AE). In line with common current Pregnancy testing, cull breeders, breeder APR industry practices, breeders are first mated as vaccination two year olds. Productive breeders are culled Pregnancy testing, cull breeders, breeder MAY at around eleven year of age. Replacement vaccination breeders are bred on property with excess JUN weaner heifers sold directly through saleyards. JUL Surplus weaner heifer and cull cow sales are important in maintaining operational cash AUG flows. Additional bull purchases are made to SEP improve herd genetics. Bulls are retained for a OCT Calving five year productive life. NOV Calving Average weaning rate is estimated at 65%. DEC Calving, mating Estimated mortality rates are four per cent JAN Mating, branding, weaner vaccination for breeders and two per cent for steers. An additional allowance of two per cent has FEB Mating, branding, weaner vaccination been used for normal culling of suspect or MAR underperforming animals from the herd. Pregnancy testing, cull breeders, breeder APR vaccination, weaner tick fever blood The main marketable product from this inoculation/vaccination, weaning operation is store weaners for on sale and Pregnancy testing, cull breeders, breeder growing. The age of turnoff is between 6 to MAY vaccination, weaner tick fever blood 12 months. Achieved weight range is between inoculation/vaccination, weaning 180 and 320 kg Lw, with an average weight of JUN Sell weaners 250 kg Lw. Produced weaners are sold through local saleyards. JUL Sell weaners Figure 2: Store weaner production programme timeline A typical annual herd production programme timeline is shown in Figure 2.

8 The economics of beef in Central Queensland Age at start of rating period Number carried AE/beast Total AE for group Table 1: Store weaner operation Extra for lactating cows - 0.53 139 herd structure Weaners – 5 months 94 0.84 45 adult equivalents Heifers 1 y.o. 89 0.66 59 Heifers 2 y.o. 86 0.8 69 Cows 3 y.o. + 525 08.8 462 Steers 1 y.o. 1 09.6 1 Bulls all ages 18 13.4 26 Total number carried 813 Total AE 800

Store weaner operational results Capital value of herd Table 2: Store Total ($) (after sales) weaner herd The results for the store weaner operation valuation show an estimated gross margin10 of Value of cows and heifers 482 ,119 $92.04/AE. Herd structure breakdown, capital Value of steers and bullocks 928 herd valuation, gross margins and annual Value of bulls 2 years & older 45 ,780 husbandry costs for the store weaner operation Total 528 ,827 are shown in the tables 1-4. Imputed interest on herd capital @ 10% 52 ,883 Table 4 shows husbandry costs per head on an annual basis. Prices are derived from market prices and based on general husbandry practices as outlined in the production notes section of this document.

Table 3: Store Value ($) $/Herd $/Beast $/A.E. weaner gross Net cattle sales 155 ,878 1911.8 1945.8 margins consisting of: Surplus weaner heifers 34, 330 Breeders 40, 943 Steer weaners 79, 738 Steer sales 809 Husbandry costs 18 ,125 22.03 22.66 consisting of: Surplus weaner costs 117 Weaner costs 2, 361 Heifer costs 2, 112 Breeder costs 13, 403 Steer/bull costs 127 Bull replacement 11,242 133.8 145.0 Gross Margin 126, 512 155.76 158.41 GM less interest 73, 629 900.6 92.40

Table 4: Store Cattle husbandry costs per head ($) Weaner Heifer 1 y.o. Breeders Steers/Bulls weaner annual Dip, drench, vaccine etc. $01 .18 $80.7 $65.9 $65.9 husbandry costs Fodder, licks, supplements etc. $51 0.0 5$1 0.0 5$1 0.0 Sold weaner cost (106) $1.01 Total husbandry cost/hd for group $62 8.2 3$2 0.7 $1 2 5.9 $6.59

10Gross margin quoted net of interest on livestock.

The economics of beef in Central Queensland 9 Store weaner operation sensitivities The gross margin effects of varying herd weaning rate, weaner price and breeder mortality rates are shown in Figures 3 and 4. Figure 3 shows the effect of weaner price changes. For each given weaner price, higher weaning rates increases gross margin.

Figure 3: Store weaner price 160 $485 x sensitivity matrix x $444 140 $404 $364 x 120 $323

100 x

80 x Gross margin ($) margin Gross 60 x 40

20 45 55 65 75 85 Weaning rate (%)

Figure 4 demonstrates the negative gross margin impact of increasing breeder herd mortality rates. For each given weaning rate, increases in the herd breeder mortality rate result in reductions in the gross margin.

Figure 4: Store 160 weaner breeder 1% x x 2% mortality 140 sensitivity matrix 4% 6% x 120 8% 10% 100 x

80 x

60 Gross margin ($) margin Gross x 40

0 45 55 65 75 85 Weaning rate (%)

10 The economics of beef in Central Queensland Coastal speargrass breeder/store Month Husbandry practices/activities steer production model JAN Mating FEB Mating The coastal speargrass breeder store steer is MAR based around a breeding herd of 800 AE, Pregnancy testing, cull breeders, breeder APR with replacement breeders bred on property. vaccination Additional bull purchases are made to improve Pregnancy testing, cull breeders, breeder MAY herd genetics above the natural rate. Bulls vaccination are retained for a five year productive life. JUN Breeders are first mated as two year olds and JUL culled at age eleven. Excess weaner heifers are sold through saleyards. Surplus weaner AUG heifer and cull cow sales are important in SEP maintaining operational cash flows. OCT Calving NOV Calving Weaning rate is estimated at 65%. Estimated DEC Calving, mating mortality rates are four per cent for breeders and two per cent for steers. An additional JAN Mating, branding, weaner vaccination allowance of two per cent has been used for FEB Mating, branding, weaner vaccination normal culling of suspect or underperforming MAR animals from the herd. Such animals are sold Pregnancy testing, breeder vaccination, through saleyards or directly into processing APR weaner tick fever blood inoculation/ operations. vaccination, weaning Pregnancy testing, breeder vaccination, The focus of the operation is store steer MAY weaner tick fever blood inoculation/ production. Age of turnoff is between 18 and vaccination, weaning 24 months of age, with weight ranges up to JUN 440 kg. Average weight is 360 kg Lw. JUL AUG A typical breeder store steer annual production SEP programme timeline is shown in Figure 5. OCT Calving NOV Calving DEC Calving, mating JAN Mating, branding, weaner vaccination FEB Mating, branding, weaner vaccination MAR Sell store steers, pregnancy testing, APR breeder vaccination, weaner tick fever blood inoculation/vaccination, weaning Sell store steers, pregnancy testing, MAY breeder vaccination, weaner tick fever blood inoculation/vaccination, weaning

Figure 5: Breeder store steer production programme timeline

The economics of beef in Central Queensland 11 Table 5: Breeder store Age at start of rating period Number carried AE/beast Total AE for group steer herd Extra for cows weaning a calf – 0.53 124 structure adult equivalents Weaners – 5 months 260 0.84 126 Heifers 1 y.o. 80 0.66 52 Heifers 2 y.o. 76 0.8 61 Cows 3 y.o. + 469 0.88 412 Steers 1 y.o. 1 09.6 1 Bulls all ages 16 13.4 23 Total number carried 902 Total AE 800

Table 6: Capital value of herd Breeder store steers results Total ($) Breeder store (after sales) steer herd The results for the store steer operation shows Value of cows and heifers , value 430 704 an estimated gross margin of $105.33/AE. Value of steers and bullocks 72, 112 Herd structure breakdown, husbandry costs, Value of bulls 2 years & older 33, 325 gross margins and herd valuations for the Total 536 ,141 store steer operation are shown in the tables Imputed interest on herd capital @ 10% 53, 614 below. Figure 7 shows the breeder mortality sensitivity matrix for this operation.

Table 7: Breeder store Value ($) $/Herd $/Beast $/A.E. steer gross Net cattle sales 171 ,731 190.92 2146.6 margins consisting of: Surplus weaner heifers 30, 669 Breeders 36, 578 Store steers 103, 761 Steer sales 723 Husbandry costs 20 ,856 23.11 267.0 consisting of: Surplus weaner costs 325 Weaner costs 6, 552 Heifer costs 1, 886 Breeder costs 11, 973 Steer/bull costs 114 Bull replacement 12, 997 14.04 165.2 Gross Margin 137, 879 1528.7 172.53 GM less interest 84 ,265 93.73 1053.3

Table : 8 Cattle husbandry costs per head ($) Weaner Heifer 1 y.o. Breeders Steers/Bulls Breeder store steer annual Dip, drench, vaccine etc. $01 8.1 $80.7 $65.9 $65.9 husbandry Fodder, licks, supplements etc. $ . $ . $ . costs 51 00 51 00 51 00 Sold weaner cost (106) $1.01 Total husbandry cost/hd for group $62 8.2 3$2 0.7 $1 2 5.9 $65.9

12 The economics of beef in Central Queensland Store steer operation sensitivities The gross margin effects of varying herd weaning rate, weaner price and breeder mortality rates are shown in Figures 6 and 7. Figure 6 shows the effect of store steer price changes. For each given store steer price, higher weaning rates increase gross margin.

190 $713 x $653 170 $594 x $535 150 $475 x 130 x 110

90 x Gross margin ($) margin Gross 70 x 50

30 45 55 65 75 85 Weaning rate (%)

Figure 6: Breeder store steer price sensitivity matrix

Figure 7 shows the negative gross margin impact of increasing breeder herd mortality rates. For each given weaning rate, increases in the herd breeder mortality rate results in reductions in the gross margin.

180 1% x 2% 160 x 4% 6% 140 8% x 10% 120 x

100 x 80

x 60 Gross margin ($) margin Gross

0 45 55 65 75 85 Weaning rate (%)

Figure 7: Breeder store steer breeder mortality sensitivity matrix

The economics of beef in Central Queensland 13 Brigalow breeder (EU) Month Husbandry practices/activities JAN Mating The brigalow breeding property model is based FEB Mating around a breeding herd. Replacement breeders are bred on farm. Additional bull purchases MAR Pregnancy testing, cull breeders, breeder are made to improve herd genetics with APR vaccination bulls retained for a five year productive life. Pregnancy testing, cull breeders, breeder MAY Breeders are first mated as two year olds and vaccination culled at age eleven. Excess weaner heifers are JUN sold off directly through saleyards. JUL Higher weaning rates are typical of this AUG country and a weaning rate of 70% has been SEP used. Estimated mortality rates are three per OCT Calving cent for breeders and one per cent for steers. An additional allowance of two per cent has NOV Calving been used for normal culling of suspect or DEC Calving, mating underperforming animals from the herd. JAN Mating, branding, weaner vaccination FEB Mating, branding, weaner vaccination The main marketable product from this MAR operation is finished steers for the European Pregnancy testing, cull breeders, breeder Union (EU) market as defined by the market APR vaccination, weaner tick fever blood specifications shown in Table 9. Expected inoculation/vaccination, weaning turnoff age is 2 to 2 ½ years in the live weight Pregnancy testing, cull breeders, breeder range of 500 to 620 kilograms. Finished product MAY vaccination, weaner tick fever blood is sold through regional meatworks for export. inoculation/vaccination, weaning JUN JUL Table 9: EU market specifications AUG Market Live Carcase SEP Live weight (kg): 500–620 HSCW (kg): 260+ Fat score: 2 + - 4- Fat depth mm: 7–17 OCT Calving Sex: Steers and heifers Dentition: 0–4 teeth NOV Calving Age: 0–4 teeth Butt shape: A–C DEC Calving, mating Muscle score: A–C Fat colour: 0–3 No HGPs permitted JAN Mating, branding, weaner vaccination Meat colour: 1A–3 Eye muscle area: no requirement FEB Mating, branding, weaner vaccination

European Union European Marbling score: no requirement MAR No HGPs permitted Pregnancy testing, cull breeders, breeder APR vaccination, weaner tick fever blood Notes: inoculation/vaccination, weaning Fat score: (1 0. 2mm) to 6 (>32mm) 6 point score Pregnancy testing, cull breeders, breeder Fat depth: mm of fat on hot standard carcase at the P8 rump site MAY vaccination, weaner tick fever blood Fat colour standard*: (white) - 9 (yellow)0 1 point score inoculation/vaccination, weaning Muscle score: A (very heavy) - E (light muscling) 5 point score JUN Butt shape: A (very heavy muscling) - E (light muscling) 9 point score JUL Meat colour standard*: 1 A (light) - 7 (Dark) 9 point scale Marbling standard*: 0 (devoid) - 6 (excessive) 7 point score AUG SEP * Aus-Meat quality standard OCT Sell EU steers A typical breeder EU production programme NOV Sell EU steers timeline is shown in Figure 8. Figure 8: Breeder EU production timeline

14 The economics of beef in Central Queensland Age at start of rating period Number carried AE/beast Total AE for group Table 10: Breeder Extra for cows weaning a calf – 0.53 114 EU herd structure adult Weaners – 5 months 299 . 111 084 equivalents Heifers 1 y.o. 64 0.66 42 Heifers 2 y.o. 63 0.8 50 Cows 3 y.o. + 401 08.8 352 Steers 1 y.o. 161 09.6 111 Bulls all ages 14 1.34 20 Total number carried 931 Total AE 800

Breeder EU operation results Capital value of herd Table 11: Total ($) Breeder EU (after sales) The results for the breeder EU operation show herd value Value of cows and heifers 362 ,995 an estimated gross margin of $155.65/AE. Value of steers and bullocks , Herd structure breakdown, husbandry costs, 160 867 gross margins and herd valuations for the Value of bulls 2 years & older 34 ,737 breeder EU operation are shown in the tables Total 558 ,598 below. Figure 10 shows the breeder mortality Imputed interest on herd capital @ 10% 55 ,860 sensitivity matrix for this operation.

Table 12: Breeder Value ($) $/Herd $/Beast $/A.E. EU gross margins Net cattle sales 204, 168 2196.3 525 1.2 consisting of: Surplus weaner heifers 31, 110 Breeders 32, 566 EU steers 140 ,492 Husbandry costs 15 ,260 160.4 19.08 consisting of: Surplus weaner costs 366 Weaner costs 4, 624 Heifer costs 1, 205 Breeder costs 7, 853 Steer/bull costs 1, 212 Bull replacement 8, 530 96.1 106.6 Gross Margin 180 ,378 193 0.8 225.74 GM less interest 124, 518 1338.7 1555.6

Table 13: Cattle husbandry costs per head ($) Weaner Heifer 1 y.o. Breeders Steers/Bulls Breeder Dip, drench, vaccine etc. 0$1 3.2 $8.07 $65.9 $65.9 EU annual husbandry Fodder, licks, supplements etc. $01 0.0 0$1 0.0 0$1 0.0 costs Sold weaner cost (106) $1.06 Total husbandry cost/hd for group $1 2 3.8 8$1 0.7 6$1 5.9 $6.59

The economics of beef in Central Queensland 15 Breeder EU operation sensitivities The gross margin effects of varying herd weaning rate, weaner price and breeder mortality rates are shown in Figures 9 and 10. Figure 9 shows the effect of EU bullock price changes. For each given EU bullock price, higher weaning rates increase gross margin.

Figure 9: 250 $1064 Breeder EU x $976 bullock price 230 $ sensitivity 884 $798 x matrix 210 $710 x 190

x 170

150 x

130

Gross margin ($) margin Gross x 110

70 50 60 70 80 90 Weaning rate (%)

Figure 10 demonstrates the negative gross margin impact of increasing breeder herd mortality rates. For each given weaning rate, increases in the herd breeder mortality rate result in reductions in the gross margin.

Figure 10: 210 1% Breeder x x 2% EU breeder 190 % mortality 3 x 6% sensitivity 170 8% matrix x 10% 150 x 130

110 x Gross margin ($) margin Gross

50 50 60 70 80 90 Weaning rate (%)

16 The economics of beef in Central Queensland Brigalow bullocks trade (Jap Ox) Table 14 : Jap Ox market speciﬁcations Market Live Carcase This operation is based around a trading Live weight (kg): 530-750 HSCW (kg): 280–420 scenario. Stock is bought in from saleyards at Fat score: 4 Fat depth mm: 7-22 around 250 kg Lw and sold in a weight range Sex: Steers and heifers Dentition: 0–8 Age: Max 42 months of 570 to 620 kg Lw. The target market is the Butt shape: A–C Muscle score: A–C Fat colour: 0–6

Japanese Oxen class as defined by the market ullset f Meat colour: 1A–5 specifications outlined in Table 14. Typical Eye muscle area: >56 cm2 time on property would be between 18 and 24 fed grass Japan Marbling score: no requirement months. Notes: Animals are treated routinely as part of an Fat score: (1 0. 2mm) to 6 (>32mm) 6 point score induction process. Estimated husbandry costs Fat depth: mm of fat on hot standard carcase at the P8 rump site of $11 per head covers treatment for three Fat colour standard*: (white) - 9 (yellow)0 1 point score day sickness, 5-in-1 and tick vaccinations. An Muscle score: A (very heavy) - E (light muscling) 5 point score estimated mortality rate of one per cent has Butt shape: A (very heavy muscling) - E (light muscling) 9 point score been applied. A dressing percentage of 54% Meat colour standard*: 1 A (light) - 7 (Dark) 9 point scale has been applied. Marbling standard*: 0 (devoid) - 6 (excessive) 7 point score * Aus-Meat quality standard Jap Ox finishing operation results The results for the Jap Ox operation show an estimated gross margin of $168.61/AE. Results11 per beast and per adult equivalent are shown in Tables 15 and 16.

Table 15 : Jap Ox Sale price ($/kg DW) $22.9 $32.0 $3.21 $3.22 $3.23 $32.4 $3.25 gross margin per Sale price ($/kg Lw) $18.5 $1.36 $1.86 $14.7 $1.97 $1.58 $10.9 beast Purchase prices $1.76 $3043.5 $ 3315.9 $ 3597.3 $ 3869.7 $ 4141.2 $ 4413.6 $ 4695.0

$16.8 $ 2772.0 $ 3044.4 $ 3316.8 $ 3598.2 $83 6.71 $ 4143.1 $441 5.5 $16.9 $ 2492.5 $ 2764.9 $ 3046.3 $ 3318.7 $ 3590.2 $ 3862.6 $ 4144.0 $26.0 $ 2222.0 $ 2494.4 $ 2766.8 $ 3048.2 $3310.7 $ 3592.1 $ 3864.5 $26.1 $ 1941.5 $ 2213.9 $ 2495.3 $ 2767.7 $ 3040.2 $ 3312.6 $ 3594.0 $26.2 $ 1671.0 $ 1943.4 $ 2215.8 $ 2497.2 $ 2769.6 $ 3041.1 $ 3313.5 $26.3 $ 1391.5 $ 1663.9 $ 1945.3 $ 2217.7 $ 2499.1 $ 2761.6 $ 3043.0

Table : Jap Ox Sale price ($/kg DW) $22.9 $32.0 $3.21 $3.22 $3.23 $32.4 $3.25 16 gross margin Sale price ($/kg Lw) $18.5 $1.36 $1.86 $14.7 $1.97 $1.58 $10.9 per adult equivalent Purchase prices $1.76 $1684.7 $183 .94 $ 1993.1 $ 2143.3 $ 2292.5 $ 2442.7 $ 2591.9

$16.8 $ 1530.5 $ 1680.7 $ 1839.8 $ 1999.0 $ 2148.2 $ 2298.4 $ 2447.6 $16.9 $ 1386.2 $ 1536.4 $ 1685.6 $ 1835.8 $ 1994.0 $ 2144.2 $ 2293.4 $26.0 $ 1232.0 $ 1382.2 $153 1.4 $ 1681.6 $ 1830.8 $ 1989.9 $ 2149.1 $26.1 $107 8.7 $ 122.98 $1387.1 $ 1537.3 $ 1686.5 $ 1835.7 $ 1985.9 $26.2 $29 4.5 $107 4.7 $ 1223.9 $ 1383.1 $ 1532.3 $ 1681.5 $ 1831.7 $26.3 $77 0.3 $29 0.5 $107 9.6 $ 1229.8 $ 1388.0 $ 1537.2 $ 1687.4

11 Results are shown less interest cost.

The economics of beef in Central Queensland 17 4 Production notes Herd parameters Breeding operations • Weaners are fed weaner pellets for 30 days The following herd parameters were applied to start their growth pattern. Weaner meal in formulating the production models and may also be an option. accompanying gross margins. • Calves are vaccinated with 7-in-1 initially and again as weaners. Table 17 : Coastal Herd parameter Brigalow Applied herd speargrass • Weaners are treated with tick vaccine at parameters, by land type Branding rate 68% 73% weaning. Weaning rate 65% 70% • Bulls are vaccinated against leptospirosis Bull ratio 3% 3% and botulism annually. Breeder mortality 4% 3% • Breeders are vaccinated against leptospirosis Age at first calving 2 2 and botulism annually. • Replacement breeders (heifers) receive Maintenance of such estimates depends upon an additional leptospirosis and botulism good animal husbandry practice such as vaccination. preventative health treatments. Animals are • Breeders are fed M8U for a period of 100 drenched for internal parasites and sprayed days in 30% of all years. Breeders are also regularly for buffalo fly. sprayed against buffalo fly four times per annum. Herd bull ratio • Weaners are sold through central saleyards, whilst culled animals - heifers, cows and Bull ratio was calculated at three per cent bulls are sold directly into meatworks. for all breeding scenarios. Bull replacement • Agent’s commission account for 5% of was costed at $5,000 per head. A bull may marketing costs of weaners. be purchased by the manager looking to improve herd genetics at a rate faster than Jap Ox finishing operation would be achieved by using replacement bulls • Animals coming onto property are bred on property. Estimated breeding values vaccinated against three day sickness. (EBVs) -the extra benefit assigned from using • Animals coming onto property are particular genetic bull traits- may be used to vaccinated against tick fever. gauge likely returns. • Animals coming onto property are vaccinated with two treatments of 5-in-1. Husbandry practices • Animals are sprayed for buffalo fly four Husbandry practices can be tailored to specific times annually. property management practices. The following • Culled animals are sold directly into provides representative best practice applicable meatworks. to CQ production operations. • Finished animals are sold to meatworks for further processing and export.

18 The economics of beef in Central Queensland Additional assumptions

• Best management practices (BMP) are used in the running of the beef enterprise business. This includes completion of all recommended veterinary tasks and the feeding of supplementary rations as appropriate. • Recent market prices are used. Prices should be seen in context of their historic record high levels. • Animal weights are taken from past publications as well as expert technical advice from extension staff. • No additional labour has been costed in the current gross margin analyses. All labour is provided from on farm resources. • All variable costs are based on recommended retail prices (r.r.p) at Rockhampton as at May 2006.

The economics of beef in Central Queensland 19 A ppendix 1 Land type descriptions Coastal speargrass land types

Coastal ﬂats with mixed eucalypts on grey earths � �

Landform Alluvial plains with variable terraces, levees, swamps and channels Woody vegetati on Swamp mahogany, poplar gum, pink bloodwood, blue gum Under storey: broad-leaved teatree Expected native pasture composition Preferred Native sorghum, forest blue, early spring grass, silky browntop, black spear grass, giant spear grass, kangaroo grass Non-indicator Reed grass, pitted blue, golden beard grass, Ischaemum austrate Undes irable Blady grass, purpletop chloris, green couch, crowsfoot grass, lovegrass, sed ges Annuals Five minute grass Suitable sown Callide rhodes grass, Bisset creeping bluegrass, shrubby stylo (Seca), pastures pangola, green panic, siratro on better soils, para grass grows on swampy plains Introduced wee ds Giant rats tail grass / weedy sporobolus grasses, sicklepod Soil Bleached silty loam (Dermosols and Kandosols) but including clays, earths and poorly developed alluvial soils Description Surface: hard-setting Surface texture: silty loam Subsoil texture: light to medium clay Water availability Low Rooting depth 0.5m Fertility Low total nitrogen; low phosphorus Salinity Low to moderate Sodicity Low pH Neutral to acid Utilisation 18% Enter prise Breeding / fattening where soils deeper and with high fertiliser application Land use and Many areas can be developed to sown pastures with high inputs management recommendations Land use limitati ons Underlain by hardpans and susceptible to summer waterlogging (Poorly drained) Surface turns to bulldust Reg rowth when cle ared

20 The economics of beef in Central Queensland Coastal sand dunes

� �

Landform Coastal sand dunes Woody vegetati on Pink bloodwood, white mahogany (yellow stringybark) moreton bay ash, turpentine, paperbar k/teatree, swamp box Understorey: grass tree, grevillias, coast banksia Expected native pasture composition Preferred Kangaroo gras s, giant black speargrass Non-indicator Fire grass, Eriocholoa spp Undes irable Wiregras s, lov egrass Annuals Suitable sown Bisset creeping bluegrass, indian couch (Keppel and Medway), carribean pastures and shrubby stylos; limited options for pangola and rhodes grasses Introduced wee ds Molasses grass, lanta na, bellyach e bush Soil Deep yellow, red and brown sands (Tenosols) Description Surface texture: loose sand, often bleached Surfa ce texture : sand Sub- soil texture: sand Water availability Very low Rooting depth Deep (>1m) Fertility Very low total nitrogen; very low phosphorus Salinity Low Sodicity Non-sodic pH Neutral to acid Utilisation 18% Enter prise Breeding Land use and Limited clearing options, fire or chemical treatment of woody regrowth, less management use of fire where there is sown pastures recommendations Land use limitati ons Low nutritional quality of native pastures High input costs for sown pastur es

The economics of beef in Central Queensland 21 Teatree plains

� �

Land resource area Teatree plains Woody vegetati on Broad-leaved teatree/paperbark, narrow-leaved teatree, pink bloodwood and bull oak with emergent narrow-leaved ironbark, queensland peppermint, poplar gum, ghost gum, grass tree and cabbage palm Expected native pasture composition Preferred Golden beard grass, black spear grass, giant black speargrass, native legumes( Alysicarpus and Desmodium species) Non-indicator Undesirable Poverty grass, blady grass Annuals Summer grass es (Digitaria and Brach iaria speci es) Suitable sown Pangola grass, Tully humidicola, villose joingvetch on low-lying areas with pastures poor drainage; signal grass, Bisset creeping bluegrass, rhodes grass, carribean and shrubby stylos on better drained areas Introduced wee ds Weedy sporobolous grasses Soil Either bleached coarse sands or silty surfaced grey and brown sodic duplex soils with debil-debil mounds (Tenosol or Sodosol) Description Surface: hard-setting Surface texture: coarse sand or silty loam Sub-soil textu re: coarse sand or mottled medium clay Water availability Low to very low Rooting depth 0.6m Fertility Very low total nitrogen; very low phosphorus Salinity Low Sodicity Only texture contrast soil, moderate (0.6 – 0.9m) pH Acid Utilisation 15% Enter prise Breeding, occasional growing and fattening using high input sown pastures Land use and Use fire to control seedlings and woody regrowth. Teatree regrowth following management clearing may require deep disk ploughing (15-20cm), blade ploughing or Gra sslan treatment. recommendations Use fire less frequently in sown pasture systems. Retain trees on bed and banks of streams and larger (shade and shelter) areas of tree vegetation as clumps or strips

Land use limitati ons Woo dy reg rowth pro blems Erosive Access problems due to summer waterlogging Low nutritional value of native pastures; high input costs for sown pastures

22 The economics of beef in Central Queensland Brigalow land types

Brigalow with Blackbutt

� �

Landform Undul ating scrub plains Woody vegetati on Brigalow scrub with emerge nt blackbutt or yapunyah. Solid patches of blackbutt or yapunyah tend to occur in this land type where there is a high soil salt load. Under storey: false sandalwood, yellowwood or wilga, sometimes leopardwood, sally wattle or currant bush Expected native pasture composition Preferred Queensland bluegrass, desert mitchell, forest bluegras s, black spear grass, bull mitchell grass, kangaroo grass Non-indicator Native millet, curly windmill grass, brigalow grass, pitted bluegrass, tall chloris, and yabila (star) grass, barbwire grass Undesirable Dark wiregrass, fairy grass, slender chloris, bottlewasher grass, purple lovegrass Annuals Flinders grass , small burr grass Suitable sown Buffel, green panic, rhodes grass, leucaena, shrubby stylo (Seca) or pastures caribbean stylo (Verano or Amiga) Introduced wee ds Parthenium Soil A hard-setting, red to brown, texture contrast soil with a sodic B horizon (brown sodosol) Description Surface : hardsetting; Surface texture : sandy clay loam; Sub-soil texture: light to medium clay Water availability Low to moderate Rooting depth 60 cm Fertility Low to moderate total nitrogen; moderate phosphorus Salinity Moderate to high (below 60cm) Sodicity Strongly sodic (below 40cm) pH Strongly alkaline Utilisation 28% Enter prise Finishing Land use and Suitable for sown pastures as the light surface texture responds to small and management infrequent rainfall Maintain surface cover to reduce sheet erosion, nutrient loss and pasture recommendations rundown Erosion of roads and dams where subso il left exposed Land use limitati ons Sodic subsoil Poorly drained Hard-setting surface Reg rowth pro blems

The economics of beef in Central Queensland 23 Brigalow scrub with mixed softwood species

Land resource area Undulating scrub plains Woody vegetati on Brigalow, wilga, belah or yellowwood (belah frequency decreases to the north, yellowwood frequency increases to the north); occasional bottletree, bauhinia, myall and poplar box Understorey: currant bush, false sandalwood, lim ebush Expected native pasture composition Preferred Desert mitchell, forest bluegrass, queensland blue, curly and bull mitchell grass, kangaroo grass Non-indicator Brigalow grass, shot grass, curly windmill grass Undesirable Fairy grass, wiregrass, curly windmill grass, roly poly burr, galvinised burr Annuals Saltbushes Suitable sown Buffel grass, Bambatsi panic, creeping bluegrass, leucaena, purple pigeon, pastures Floren bluegrass, butterfly pea, caatinga stylo Introduced wee ds Parthenium Soil Dark brown and grey-brown cracking clay soils (Vertosol) Description Surface : strong and fine self-mulching; Surface texture: light to medium clay; Sub-soil texture: medium to heavy clay Water availability Moderate to high Rooting depth Deep (below 90cm) Fertility Moderate total nitrogen; moderate phosphorus Salinity Moderate (below 40-90cm, depending on location) Sodicity Low (below 60cm) pH Neutral to alkaline Utilisation 30% Enter prise Finishing Land use and Suitable for cropping on soils deeper than 45cm and on slopes less than 4% management Suitable for pasture improvement recommendations Land use limitati ons Reg rowth Salinity can effect rooting depth Moderate erosion hazard when cultivated Surface sealing soils Waterlogging

24 The economics of beef in Central Queensland A ppendix 2 Variable cost inputs

The list of input prices applied for the gross margins is shown in Table 18.

Table 18 : Item Cost /unit Notes Variable input prices LIVESTOCK HUSBANDRY Broad spectrum drench 7-in-1 $ 1.10 /head 5-in-1 $ 0.30 /head Ivomec $ 1.60 /head Based on 1 cent per kilogram per head LW Tickicide Tixaﬂy $ 1.30 /head For 20 ml/head dosage as overspray Growth promotants Compudose 400 $ 6.50 /head Compudose 200 $ 3.90 /head Veterinary Botulism vaccine $ 0.85 /head Leptospirosis vaccine $ 0.90 /head Tick fever blood $ 3.02 /head Trivalent recommended Supplements M8U $ 50.00 /head Based on 100 days feeding Biosecurity NLIS ear tag $ 3.36 /head

FREIGHT/MARKETING COSTS

Freight $ 3.97 /km For 200– 250 kilometre range double-decker Transaction levy $ 5.00 /head Sales commission 5% of sales Yard/scale fees Bulls $ 7.10 /head Heifers, cows $ 5.45 /head Yearlings $ 3.15 /head Sources: LANDMARK, MLA, Gracemere saleyards

The economics of beef in Central Queensland 25 A ppendix 3 Sale price derivation

Table 19 outlines market sale and purchase pricing used in modelling of CQ beef production systems.

Table 19: Animal Sales MLA Beef pricing Price (c/kg Yard/scale Transport Final price category Lw (kg) commission Marketing LW) fees ($) ($) /head ($) (%) levy ($) Weaner heifer 220 $1.67 5 .0 5.54 9 0.0 5 .00 3489.3

Weaner steer 250 $2.20 5 .0 55.4 9 0.0 5 .00 4600.3

1 y.o. heifer 320 $17.7 5 .0 5 .45 11.07 5 . 00 515.39

2 y.o. heifer 450 $1.56 5 .0 5 .45 13.02 5 . 00 681.37

1 y.o. steer 360 $11.8 5 .0 7. 10 13.03 5 .00 593.26

2 y.o. steer 540 $1.87 5 .0 7. 10 14.02 5 .00 886.48

Source: www.gracemeresaleyards.com.au

26 The economics of beef in Central Queensland Web linkages Bibliography The following are useful for the purposes of Aisthorpe, J. (2006). Land type identiﬁcation building similar gross margin analyses. sheets: Stocktake workshop: balancing supply and demand, Queensland http://www.agric.nsw.gov.au/tools/cattle/ Department of Primary Industries and index.html provides market speciﬁcation Fisheries, Emerald. information for a range of products and different markets Chilcott, C.R., Sandral C.J., Aisthorpe, J.L., Paton, C.J., McCallum B.S. (2005). http://www.gracemeresaleyards.com.au/ Grazing Land Management- Fitzroy Basin saleyards/market-reports/ provides market Version, Meat and Livestock Australia reports and price information from Gracemere Limited, Australia. saleyards Holmes, W.E. (2005). Breedcow and Dynama http://www.mla.com.au provides a cost of Herd Budgeting Software Package, production calculator Version 5.04 for Windows 95, 98, Me, NT, www.dpi.qld.gov.au/cps/rde/xchg/dpi/ 2000 and XP. Training Series QE99002, hs.xsl/27_119_ENA_HTML.htm is the Queensland Department of Primary beef industry page from the Queensland Industries and Fisheries, Townsville. Department of Primary Industries and Murphy, K. (1995). Beef production systems, Fisheries website and covers numerous aspects Tropical Beef Centre, Rockhampton. of beef production Ryan, T.F. (1991). Cattle costs and returns http://www2.dpi.qld.gov.au/ Central Queensland 1991, Queensland breedcowdynama/2816.html contains Department of Primary Industries, information on Breedcow and Dynama Rockhampton. computer programs as well as ordering information www.epa.qld.gov.au contains a wealth of information on natural resource and vegetation management issues including land type descriptions and regional ecosystems mapping The above is by no means an exhaustive listing, but serves as a point of reference for users seeking further information.

The economics of beef in Central Queensland 27 28 The economics of beef in Central Queensland