How steers generated $624/hd gross margin in 54 days

Glen Innes Angus breeders generate $624/head profit margin from steers

Beef
Ian Vivers, Eaglehawk, Glen Innes with McCulloch Agencies general manager Daniel McCulloch.

Ian Vivers, Eaglehawk, Glen Innes with McCulloch Agencies general manager Daniel McCulloch.

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Mounting feed bills meant new cash flow opportunities were needed.

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Glen Innes Angus breeders Ian and Sally Vivers were in the midst of mounting feeding costs in January after supporting their breeder herd through drought.

But within just 54 days a new cash flow generating opportunity saw them boasting a $624.78/hd gross margin on a line of lot fed steers.

Mr Vivers had read The Land's article on January 9 about McCulloch Agencies' interest free livestock financing package who were offering to provide clients 100 per cent of the capital required for livestock purchases with no interest or finance charges.

He made the inquiries and shortly after made the decision to move 100 Angus 16-month-old steers averaging 326 kilograms from a maintenance ration to a dedicated feedlot approach.

"Our alternative was to sell them and at that weight we were probably looking at a bit under $1000 per head," Mr Vivers said.

"That would have helped with our cash flow issue at the time but I was always feeling it was basically bailing out at a really bad time.

"I felt confident things were turning around with the weather and the markets were going to turn so to sell out of spec cattle at that time was something I wanted to avoid."

They aimed to put an extra 100 kilograms on the cattle to meet feedlot specifications in which time the market may have kicked to 330c/kg instead of 300c/kg.

The cattle had an average daily gain of 1.64 kilograms and cost about $6/day to feed, mostly a hay based ration.

It was 54 days later when the cattle were sold to a Chinchilla feedlot in Queensland averaging 440 kilograms for 445c/kg (weighed on-farm full, minus five per cent on weighing at Glen Innes).

You make decisions during drought you hope are the right ones, I'm pretty confident we made the right one. - Ian Vivers, Eaglehawk, Glen Innes

The Vivers had retained all of their breeders and were "feeding a couple thousand head of cattle for a couple of years" meaning cash flow was needed to continue their feeding commitments.

While recent rain has allowed their balance sheets to look healthy again, Mr Vivers said he wouldn't overlook doing a similar short trade again in the future.

"What this allowed us to do was to put something together so that we didn't have to work at the mercy of the market at the time and that also gave us the cash flow we needed back in January," he said.

"We effectively sold them to ourselves, we got the cash into our bank pretty much immediately...so we could pay those bills and out the other end we still got the full value of them.

"Where this facility is ideal is for the flexibility.

"Right now if we wanted to use it again if we know we are selling something in three or four months time say we were going to join some heifers and sell them pregnancy tested in calf, we could release some money out of them now so we can keep the business running and then capitalise on getting the best out of a value adding situation that we could."

The livestock financing package is beneficial for short term trading operations with funding offered for a maximum 210 day product.

After the first 120 days a marketing fee of five per cent +GST applies with that rate increasing by 0.5pc every 30 days thereafter to a maximum of 6.5pc.

McCulloch Agencies reported a large number of feedlot operations looking to purchase store cattle and lambs had taken up the finance package.

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