Small changes can make a big difference

Discussing management of carbon flows relates to both economic outcomes and environmental outcomes. This week is all about economics.

 

If I asked an average sheep or cattle producer if they could double their profit, I would be laughed at. However, if I asked could you increase production by 9%, I would get a hearing. The interesting thing is that they are both the same thing in a marginal industry. Why is this so? The table below explains why.

How a 9% increase in production doubles profit in a marginal industry.

To pick convenient figures, say it costs $10 to run an animal. If the animal produces $11 of production, then the profit per animal is $1. However, if the animal produces $12 of production, then the profit per animal is $2, i.e. a doubling of profit. BUT, going from $11 of production to $12 of production is a 9% increase in production.

What happens at the margins can be so important

Now, an example of where some of the extra 9% can come from with better management of carbon flows to produce better pastures.

If your pasture management has a cow or ewe at 99% of required body weight for conception, you do not get 0.99 of a calf or lamb, you get nothing. A slight improvement in this area can make a big difference to the bottom line.

Improving genetics relies on more than the bull & the ram

Genetic gain is another area where some of the extra 9% of production can come from with better pasture management.

I ran both cattle and sheep and, while the following discussion relates to sheep, the same logic applies to cattle.

I remember an old stud breeder telling me that people place too much importance on the ram, because each ram is put with 50 ewes. He said that at the end of the day, every mating involves one ewe with one ram. He said that if the ewes are not classed/culled, then the improvement due to a good ram is undone every time he meets a genetically poor ewe. He said it is the average of the ewes that determines how much good a ram can do. This is why I concentrated on achieving high lambing percentages, to ensure all the inferior ewes were removed.

The figures that follow are based on limiting breeders (sheep) to four age groups, i.e. keeping the breeders young. First time breeders have about 20% fewer lambs, and this naturally makes it harder to maintain a young flock when they are a high percentage of the total.

With a reproduction/lambing rate of 56%, this just maintains the breeding flock without any inferior animals being removed. At 60% it is possible to remove 6.7% of inferior animals, i.e. a 4% increase allows 6.7% to be culled. With 70% it is possible to remove 20%. At 80% it is possible to remove 30% which provides good genetic gain while at the same time still keeping the flock young. If there are 5,000 breeding ewes, then a 60% lambing rate provides 100 young cull/reject ewes for sale, while a 80% lambing rate provides 600 cull ewes for sale.

There is a big variation in production from the best animals to the worst. One year I sold the wool off the top 10% of the replacement ewes separately. This exercise was carried out prior to them being put with the rams for the first time. The wool they produced sold for 30% more than the other replacement ewes. The bottom third (based on quality) were not part of the exercise because they had been sold. You can imagine the difference between the elite ones and the bottom third that drag the average down.

Better genetics and improved constitution go hand in hand. It is improved constitution that drives increased production. Think of animals with a better constitution as being more resilient.

Animals lacking resilience when combined with pastures lacking resilience, is a recipe for low production. Higher carbon flows lead to more productive and resilient pastures which in turn lead to the higher reproduction rates necessary for genetic gain.

Another aspect that drives higher production, especially in the case of sheep where wool is being produced as well as lambs, is keeping breeders young. Youthfulness is very important for production in dry years when older breeders struggle to support offspring.

 

The 9% can come down to pastures lasting just a bit longer

 

It is in the marginal rainfall years, when you are desperate for some feed to stay in production, that the good managers really come to the fore. The better managers have fewer forced sales in the period just prior to rain, maybe say three times versus ten times for the average producer over time.

This aspect of increased production is simple mathematics, the longer the pastures last for, the fewer times you are forced to sell, with the resultant financial loss.

As a producer, I experienced this concept. One time the sheep were in the yards to be trucked the next day and it rained that night. Three years later, it rained three days before sheep were to be trucked. This highlights that the financial gain of pastures holding on just a bit longer, to stop forced decisions, is not academic. On each occasion, considerable money was involved: another example of the 9% increase.

 

The 9% can be in different pasture response to rain

 

At one level, it is true that rainfall sets the level of pasture over time, including when it will run out and animals have to be sold or removed. However, the volume of pasture produced and time frames for forced sales, with identical rain, vary from one producer to the next.

How well grass responds to rain depends on how well carbon flows have been managed in the past. Long term carrying capacity (production) is set by the health/resilience of paddocks which in turn is set by carbon flows. The 9% will often reside in this area alone.

Producers growing up steers can run more with better pasture response and they are also ready for sale sooner.

A perennial grass, lacking energy reserves, is hardly responding to rain.

The plant above is lacking resilience because of poor management of carbon flows over time. This is an extreme example to make a point. When coming off a low base of poor pastures, a 9% increase in production is very easy to achieve. Simply do some short term resting of pastures after rain to increase carbon flows.
 

Conclusion

 

A lot can happen at the margins in both the natural world and the financial world. Go a little bit more into debt and you get sold up.

Better management of carbon flows is a major component of genetic gain, one of the key ingredients of a profitable operation.

Energy, nutrients and water all follow the path of carbon. So, any increase in carbon flows increases the availability of these three factors of production.

Why purchase an expensive bull and then feed the progeny to 80% of their genetic potential.

 

Next week’s discussion: “Methane is the carbon atom taking a detour”

Alan Lauder