26 March 1999

Ex-accountant finds a formula for profitability

In the fourth of our series on

Making Money out of Beef,

James Garner visits a large

dairy cross beef finishing unit

BEEF finishers took a financial hammering in the first year of the BSE crisis, but one former accountant who turned beef finisher has stuck with it and has found a formula for success.

There is little left to chance at Home Park Farm, Liphook, Hants, where Graham Thompson finishes over 600 head of dairy cross beef cattle a year.

Having moved from the city into farming Mr Thompson brings with him an accountants skill and desire for accurate figures. He has also learnt the value of monitoring an animals physical performance.

"One of the most valuable things is a weigh crate. All my animals are weighed once a month. When you do this regularly, the animals love it.

"But without regular weighing it is hard to know exactly how they are performing. It works both ways, sometimes they might have grown better than expected, other times worse."

Mr Thompsons unit is a dedicated finishing system. He finishes all bulls within 12 months of birth and heifers within 14 months. This has other benefits as well as efficient meat production, he says.

"To compete on the world market, we have to produce meat that is succulent and full of flavour. Eating quality is where we can compete and gain premiums and the younger a beast at slaughter the more tender the meat is."

As many calves as possible are sourced straight from dairy units. "We normally strike a deal where I buy all beef cross calves, from bull semen of my choice. The main priority in choosing a bull is its calving index; I think that is fair to the dairy producer."

The calves are picked up at 10 days old, in preference to seven days, which, Mr Thompson says, is too young.

"I like to give suppliers an idea of calf price for next year. This time I said £85-£115 for bulls." Last year Mr Thompson paid £35 for heifers. He could have paid less but wanted a better quality calf.

Calves are fed seven litres of warm milk twice a day until five weeks, then ad lib 18% protein calf pellets. At 11 weeks old they move on to a maize silage based ration.

Most calves are Belgian Blue crosses which he says grow consistently to target grades and quality required by the Chitty/Waitrose producer club.

"This is particularly noticeable with heifers which have to be finished and kept lean to 500kg, 4L carcass grades," he says.

But it is not all down to breed type; feeding is crucial. Mr Thompson restricts feeding of all cattle to once a day with ad-lib wheat straw, but still ensures they meet daily liveweight gain targets.

For bulls this 1.7kg a day target is sustained by a once-a-day feeding of an 18.5% protein diet all the way to finishing. Feed levels are offered according to weight.

"A 400kg bull is given 20kg fresh weight a day. When he reaches 500kg he is 25% heavier so will be fed 25% more – 25kg," he says.

The ration consists of maize silage, rapeseed meal, wheat feed product and Bittersweet – a mix of sugar beet pulp, bread and brewers grains. Average feed costs are 44p/kg liveweight gain for bulls and 46p/kg for heifers, and there is no grass in the diet at all. "This is because grass turns meat too dark and buyers want it salmon pink in colour with the fat white-to-cream."

Maize is the staple forage and has been grown at Home Park Farm for several years.

All maize work is contracted, keeping fixed costs down by ensuring low machinery and depreciation costs. Apart from one tractor, a forklift and a mixer wagon, there are no other machines.

"I have looked at fixed costs but I cannot cut them any further. I have as little machinery as possible and employ one full time man."

In total, his fixed costs are 17p/kg liveweight gained (see table). Total variable costs are 54p/kg of liveweight gain for the bulls, with profits of 16p/kg of liveweight gain, amounting to £72/bull or £6/beast a month.

This is Mr Thompsons target, but he says he needs a further £28/head profit to leave enough to reinvest in the business and buildings.

"To become more efficient producers have to cut out middle men and then increase prices by forcing abattoirs to push beef prices up. My target price leaves me with £100/head profit before subsidy."

With supermarket retail price after costs double his selling price,

Mr Thompson believes there is room for a rise in selling price. "When this is passed down to the producer we then have a sustainable product.

"I am happy to sit down with supermarkets and say this is what I need to earn and these are my costs. There is a nasty word in there called profit, but if they cannot meet my price then they will not have the animals."

BEEF PROFITS

&#8226 Know costs.

&#8226 Monitor performance regularly.

&#8226 Set targets.

Bull beef costs at Home Park Farm

£ a head p/kg Percentage

of liveweight of output

produced

Sales 528 112

Purchase 120 26

Output 408 87 100

Variable costs

Milk powder 14 3

Rearer 19 4

Mix 180 38

Straw 15 3

Vet & Med 12 3

Marketing 11 3

Variable costs 252 54 62

Fixed costs

Labour 20 4

Machinery 20 4

Property 8 2

Water/electric/tel/ins/sundries 15 3

Interest 21 4

Interest 0

Fixed cost 84 17 21

Total cost 336 71 82

Profit on 12 months 72 16 18