Wednesday, December 6, 2023

Beat inflation with livestock management

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What if John King told you of a low-tech way to use a business overhead to create inventory and at the same time dodge inflation’s corrosive effects?
With grazing management, labour is crucial in the spring – and to effectively push a wave of feed from spring into mid-late summer requires much more effort than industry advice endorses, John King cautions. Photo:
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By John King, author of Curiosity – Farmers Discovering What Works, and facilitator of Beef & Lamb NZ-sponsored Curious Cockie clubs

If inflation reaches double digits as it has in the last four recessions, how might farmers paying down debt on high land values based on production figures from purchased inputs that never account for inflation, survive?  

Seed, fertiliser, and tractors leave farmers on the inflation cycle, but livestock farmers have an unfair advantage.  

I once took a group to a hill property where they hadn’t used fertiliser in decades.  With a huge mortgage and interest rates at 23%, they couldn’t afford both fence and fertiliser back in the 1980s.  Infrastructure always has a longer return on investment than fertiliser.  

They found pasture production did not collapse after the first year, so they kept going.  They built their flock around the exceptional ewes that emerged from grazing low-octane feed. 

Interestingly, without maintenance fertiliser they purchased better land because they could service more debt, a statement bound to raise the ire of any fertiliser rep and executive.  (Many farmers right now will be tempted to drop fertiliser, but this family bought fertile soils with those funds and were not merely clearing bills.)  

Fertility leaving livestock farms via products isn’t the huge problem industry promotes it as.  Instead, it’s how fertility shifts within farm boundaries.  Open gate policies during droughts, low stock densities and set stocking move fertility from the middle of paddocks to hill tops, gateways, trough sites, shelterbelts, hay and mineral feeders, waterways and stock camps, resulting in weeds, soil compaction and pasture burnout.  These outcomes perpetuate maintenance fertiliser.  Getting back to basics, especially grazing management, is simple and cheap, but not the easiest skill in times of stress.  

Even Sir Bruce Levy, in his book Grasslands of New Zealand, states that soil fertility largely develops from what falls out of the back of an animal, not the few hundredweight of phosphate fertiliser, despite how important that is for clover.  

Yet how many fertiliser reps calculate the cents/kg DM their products deliver without deducting the impact of clover, dung and urine, which, according to historic research, could be as high as 80-100% of pasture production.   

I took another group to a sheep and beef property renowned for its investment in irrigation, fencing and pastures.  When touring its dryland we stopped at a site where the farmer had parked his ewes overnight on a postage stamp and could still see a difference many years later.  Upon being asked if he had done it again since or anywhere else, he said no.  

While his irrigated pasture pumps out profits, consider this logic: if he had parked his sheep on a different night pen for 150 nights per year over the time since his first attempt, the productive dryland area would now be huge. The impact of night pens lasting so many years testifies that the ROI of concentrating fertility was longer than maintenance fertiliser (three years).  

To put in context, developing a property this way does not require an engineer’s report, council consent, or a bank loan, nor ongoing subscription fees for water, plumbing and electrical services, all of which are subject to inflation.  Instead, it uses a business overhead, the shepherd’s wage.  

There is not another industry that wouldn’t leap at the chance to create inventory (pasture) from an overhead as it requires no additional cash, and in many instances, low-maintenance technology.  

So while gross farm income (GFI) is lower, targeting nutrient transfer through grazing management steps farmers off the inflation cycle. Its appeal to accountants, bankers and farmers remains low because technology provides many more options to fiddle depreciation rates and capital values.

Furthermore, having fewer mobs simplifies grazing management. Hill country farmers shifting mobs of over 10,000 stock units daily make it clear how it reduces labour, subdivision and fertiliser costs.  When the farm is all sheep, there is no requirement to fence off waterways reducing water supply costs and associated maintenance.  

However, with grazing management, labour is crucial in the spring.  It’s clear that, to lift animal performance or if there’s not enough grass, shifting mobs multiple times daily is better for pasture and livestock than set-stocking.  The ability to execute this with any precision is severely compromised by other labour-demanding jobs labelled as best practice, such as making silage and planting fodder crops.  To effectively push a wave of feed from spring into mid-late summer requires much more diligence and effort than industry advice endorses.  

Everybody knows industry organisations promote production because that is how they are funded.  For farmers tired of chasing higher GFI, there are ways to be resilient when times get tough.  

Calculating how grazing management reduces farm working expenses through placement of fertility is unlikely to be an attractive industry best practice.  Yet in a world where growing the cheapest food has always been a winner, this is a livestock farmer’s unfair advantage. 

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