Understanding the variability in sheep and beef farm profitability
A wide variation in profitability exists between farmers across New Zealand. Not all of this variation can be simply attributed to land class, absolute production levels or debt levels. Understanding what makes one farmer profitable when another struggles to break even is necessary to enable the development of programmes and support to improve the overall sector's profitability. This paper reports on the results of exploratory analysis on North Island hard hill country to identify what factors are linked to the large variation in profitability observed between farms. The exploratory analysis used simple correlation analysis to study the relationship between selected farm attributes to identify those that appear most important to determining overall farm profitability. The initial results indicated that on Class 3 farms stocking rate, sheep to cattle ratio and lambing percentage are important variables related to profit. As with any business, realising the profit potential of a farm is the combination of a well thought through strategy and sound execution. The variables identified in this exploratory analysis are core parts of the strategy, but to realise the profit potential, implementing these has to be tailored to the farm. Keywords: profit, hill country, stocking rate, sheep to cattle ratio, lambing percentage, EBITR (Earnings before Interest, Tax and Rent)