Northern beef producers not sustainable
The other 80pc have almost no skills in finance and debt management, and little understanding of the key profit drivers in their herds.
They also have a poor attitude to adopting new technologies to increase the efficiency of their businesses, and have a poor capacity to manage climate risks.
Mr Holmes outlined this bleak view of the performance of beef farms in the Top End to a Meat and Livestock Australia producer forum at Beef 2015 in Rockhampton.
He draw on the findings of the latest Northern Beef Situation Analysis, which was first produced in 2013 and has now been updated. Mr Holmes was involved in the preparation of both reports, which covered 14 regions across northern Australia.
The latest report was based on 12 years of data and focused on eight performance criteria around the ability of a business to generate enough profit to cover operating expenses and capital investment, and repay debt on time while providing returns to the owners comparable to the standard average annual wage.
Businesses also needed to be able to maintain equity at 85pc, survive succession planning with the farm and family intact and the retiring generation with enough money to enjoy independent lives.
Only 20pc of beef businesses in northern Australia measured up, Mr Holmes said.
The “big picture” for the other 80pc was to lift the productivity of their herds, land and people, but he couldn’t see that happening despite the ready availability of the knowledge and research findings to achieve increased profitability.
He said the market would most likely solve the problem and suggested astute buyers may get some bargains in three or four years' time.
Many northern Australian beef producers had been swept up in the property price bubble in 2002 which had resulted in ridiculous land prices.
'High' beef prices
Equally ridiculous was current talk about high beef prices which, in real terms, were on a par with those of 1985, Mr Holmes said.
He said prices received by Top End cattlemen were having no impact on their profitability.
The big driver of profitability was productivity gains – or the lack of them for most producers – in herd performance, along with the need to reduce business costs.
Reproduction rates and genetics had to be improved and mortality rates reduced to lift productivity gains beyond their average of just one per cent a year in northern Australia’s beef sector.
Meanwhile, the industry’s terms of trade were shrinking by two per cent a year. The scene was set for many producers to go out backwards, Mr Holmes said. A more productive herd would also reduce grazing pressure and improve environmental sustainability. Operating costs such as labour and investment spending needed to be tailored to have the most impact in terms of productivity and profits.
The rule should be one full-time employee per 2000 AEs (adult equivalents), Mr Holmes said.