Tough times call for new strategies

2008-11-28 00:00

THERE is a special pleasure in watching cows give birth to their progeny and then following the progress of those calves as they grow up into pretty young heifers, which are eventually mated to a bull.

Two hundred and eighty-three days later (nine and a half months) these heifers produce their own calves weighing about 30 kilograms or eight percent of their mother’s weight of 375 kilograms. Human babies weigh only four percent of their mother’s weight at birth, but calves have to be fairly self-sufficient when they are born so are more mature than humans. The calves are gangly but can at least get around a few minutes after being born.

The cows wean their calves at about 200 to 300 days, by which time the calves are living on grass alone. They are able to be bred at two years old.

This cycle of reproduction and growth is something that farmers come to love. I have seen many 80-year-olds spending their Sundays wandering about their herds of cattle in the bush. There is a serenity about these farmers that is difficult to explain, but it is there, irrespective of whether beef production pays or not.

I am sure that this serenity that comes with cattle breeding is an important part of why farmers persist with this business.

Farming with cattle has always been a long-term, low-risk and low-profit business. The years of 2005 and 2006 gave the best profits seen in cattle production for many decades. But the problems facing the world economy and ours have turned this around.

After seeing beef farmers making a return on investment in their livestock of five percent per annum for many years, this increased to above 10% for the two good years.

This year, a farmer with 400 cows, with an investment of R3,6 million in his or her livestock made a 2,9% return or R104 400. When the capital invested in land is taken into consideration this return drops to 1,3%.

On the upside, those farmers who cut out feeding hay and reduced machinery and labour costs made a return on livestock of 10,1% with a margin of R364 200.

What is the scenario for next year? Usually these figures are updated annually in February but due to huge cost increases in fuel and fertiliser I have had to update the financials this month for next year to keep on top of inflation. The results are difficult to accept.

The average beef farmer with 400 cows will make a loss of R46 200. However, those who live in good cattle country or those who have cut their costs will make a reasonable return of R288 000.

This indicates that there is room to survive even in the bad years. It is obvious that for farmers to progress they have to check all their paradigms or beliefs that could be holding them back.

In most farming enterprises the farmers are price takers. In other words, the farmer has to take what the consumer is prepared to pay him or her. This is the case with beef and dairy production.

This means that the only way for these producers to ensure a profit is for them to cut their costs. This is often hard to accept but no one ever said that farming or any other business is easy. Those who cut their costs appropriately will survive through the hard times and when the wheel turns they will do very well.

I am sure that in the dairy industry there will be many irate dairy farmers accusing the dairy processors of dropping the milk price. If you do not like the price they are offering then go into milk processing yourself or get out of milk production.

Many beef farmers believe that, like the milk processors, the butchers rip them off. When the beef producers try going into the butchery business, to get more for their kilogram of beef, the great majority of them come unstuck after finding that the butchery business is also a tough one. Well, so is the milk processing business.

I am not prepared to take sides in this debate except to say that I know many beef and dairy farmers who are still surviving in the present downturn in the economy.

If you cannot survive by becoming more efficient then you have to make a decision to change your ways or get out. Farming has become a tough business so treat it as such. Stop blaming someone else if you cannot make it. Best wishes to those who have the business sense to make the right decisions in the current extremely volatile situation.

I envy the old-time beef farmer who finds it sufficient reward to wander around his or her beef cattle on a Sunday afternoon and live on mealie pap and gravy.

• Alastair Paterson is an agricultural consultant. He can be contacted at 033 330 4817, 082 880 9002 or e-mail agpaterson@satweb.co.za

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