Overview
This report presents and discusses cost of production estimates for beef cattle and sheep producers for the three years 2012-13, 2013-14 and 2014-15.
The report draws on data from the ABARES annual Australian Agricultural and Grazing Industries Survey (AAGIS). This survey has been conducted by ABARES and its predecessors since 1977-78 and provides government and industry stakeholders with important data for analysing and monitoring changes in Australia's broadacre industries.
Meat & Livestock Australia commissioned and funded this report.
Key Issues
• The on-farm cost of beef production on a per kilogram live weight basis increased between 2012-13 and 2014-15, as producers increased farm expenditure in 2014-15 in response to the much higher prices received for beef cattle. Between 2008-09 and 2012-13, producers pared back expenditure on beef inputs to a minimum in response to low beef cattle prices in an attempt to maintain operating margins (receipts per kilogram less costs of production).
• The largest increase in production costs occurred in northern Australia, where many beef producers were also subject to dry seasonal conditions in 2013-14 and 2014-15. This resulted in increased expenditure on fodder and freight. Overall, the total cost of production increased between 2012-13 and 2014-15 by 33 cents per kilogram live weight in northern Australia and by 25 cents in southern Australia.
• Total costs of production averaged over the three years ending 2014-15 were similar in southern and northern Australia, at 174 cents per kilogram live weight in southern Australia and 175 cents in northern Australia. Northern Australia includes Queensland, the Northern Territory and the Kimberley, Pilbara and Murchison-Gascoyne regions of Western Australia. All other regions are included in southern Australia.
• Higher beef cattle prices in 2014-15 resulted in operating margins increasing relative to the very low margins recorded in 2013-14. However, expenditure on farm inputs increased, so operating margins were similar to those recorded in 2012-13.
• The average on-farm cost of sheep production on a per kilogram live weight basis remained largely unchanged between 2012-13 and 2014-15.
• The average cost of production for beef cattle and sheep producers for the period 2012-13 to 2014-15 decreased as production size increased, which indicates that significant economies of size exist in beef and sheep meat production. These economies of size would be an incentive to expand beef and sheep meat production to enhance profitability.
• Economies of size for sheep producers appear to result mainly from larger sheep enterprises using farm capital and labour more efficiently. However, for beef producers, cash operating costs for larger herd size producers were lower than those for smaller producers and they used farm capital and labour more efficiently.
