12/12/08
Being big isn’t essential to top suckler herd performance. Unit costs are a far better indicator of business performance than output. And fixed costs are the area on which most people should focus most of their improvement attention.
These are the key findings of more detailed analysis of the latest Business Pointers annual enterprise costings data by EBLEX Ltd, the industry body for beef and lamb levy-payers in England; findings which underline the substantial opportunities large numbers of herds have to improve performance without any increase in business scale.
The 2007/8 EBLEX records show top third performing herds have average fixed and variable costs nearly £300/cow lower than those in the bottom third. They also reveal the best performing herds are, on average, double the size of the worst performing.
Dispelling the notion that larger units are necessarily more efficient, though, the detailed analysis shows some 50-cow herds have total production costs far lower than herds with 100 cows and on a par with ones of 400 cows or more.
It also reveals that output is a relatively poor guide to business performance – the costed herd with the highest output/cow actually being among the bottom third margin earners. In contrast, the best performing herds were all those with some of the lowest unit costs while the worst performing ones were notably high cost producers.
The EBLEX-costed herds with 40 to 60 cows, for instance, had total costs averaging £407/cow in 2007/8 with the best performing herd recording costs less than half those of the worst performer.
Interestingly, there was relatively little difference in variable costs – around £40/cow – between the best and worst performers within the size group, although the top performing unit did have a major output advantage by selling noticeably heavier calves as well as slightly lower costs.
The real performance gap lay fairly and squarely in fixed costs, with the worst performing herd paying out fully £330/cow more than the best performer. Representing almost 90% of the overall cost difference between the two herds, this clearly highlights the most fruitful area for improvement efforts in most cases.
EBLEX stresses there is much most suckler herds can do to improve their business performance without having to become larger, insisting that their primary focus must be on understanding their costs and assessing the extent to which fixed costs, in particular, can be reduced through simplification or reorganisation.
In addition to comparing their performance with annual Business Pointers data, it advises producers to use the Snapshot and What If ? tools available free of charge to all English levy payers as a simple way of assessing business efficiency and planning improvements.
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