The Sunday News
Mhlupheki Dube
ONE often overlooked aspect of farming as a business concept in livestock production is managing for profit.
To begin with we have discussed extensively on this platform how most smallholder livestock farmers still practice subsistence production as opposed to commercial production.
What is not in dispute, however, is that every smallholder livestock farmer appreciates the fact that livestock in its various forms is a reliable store of value.
It is therefore, no accident of thought that even a person who has very little regard in terms of management investment on his animals, will instantly turn to disposal of a few of his animals to solve a sticky financial issue.
It could be a health bill that needs to be met, funeral or wedding costs, going through to education expenses for the kids, a farmer will retreat to his kraal and take out a few animals to the market. Which is why I disagree with the generally peddled notion that most smallholder livestock farmers keep animals for prestige without redeeming the value to enjoy the benefits of their sweat.
As a starting point the fact that they recognise prestige and derive it as a direct correlation to the size of their herd means they know the value of that herd. Who derives prestige from a worthless material? No one, everybody takes pride and prestige from associating with something of immense value, it is that simple.
Proponents of this line of thought substantiate their argument by noting that such smallholder livestock farmers live a near-poverty life of struggling when he/she could easily sell some of the animals and meet the life’s needs.
In other words, why is the guy walking on foot when he could sell an insignificant fraction of his herd and buy a car?
The argument sounds plausible until one appreciates the fact that priorities of spending are never a universal aspect and hence, we spend our incomes in a wide range of diverse issues.
The fact that the guy is not as trigger-happy as you would in taking animals to the market, does not mean he doesn’t know the value of his animals, he is just slower than you in spending, period!
However, one critical component that I find missing in most smallholder livestock farmers, is managing for profit. Even those farmers who could be trying to approach their enterprise from a commercial angle, are often found wanting with regards to this aspect.
A colleague of mine with a small herd of just under 100 animals, had more than six helpers on his farm and a basic calculation of the wages bill revealed that by the end of the year the farmer was losing around nine animals to wages costs.
In managing for profit therefore, a farmer should calculate if the action one is taking will result in a profit or loss. Will using commercial feeds instead of hay bales, result in a net profit or loss of the enterprise? It should not be just about saving the herd from poverty deaths, at what cost is that happening and will that be absorbed by the income of the enterprise and still declare a profit at the end?
Livestock farmers’ costs are usually in feed for supplementing the herd as most of our grazing is not sufficient to take the animals through the dry season. It is also about the cost of helpers in terms of their wages and upkeep. These are the components which need to be managed diligently to ensure viability of the enterprise and the rule of the thumb is to take the least expensive but effective option. Managing for profit will also entail examining your herd to ensure that you are not carrying non-productive animals at any given time. Passengers simply have to go because they become excess luggage which you carry at your expense. You are paying a guy for the whole year to look after four cows in your herd which have not given you a calve in three years, why?
Also, you as a profit-driven management trajectory, it is important to minimise points that bleed the enterprise and one such important aspect is cutting your losses from mortalities and theft. Mortality is the single most important aspect that contributes to a loss-making livestock enterprise. It could be calf mortality, if it’s too high or poverty deaths due to poor grazing. Add stock theft to this depressing equation then you have a perfect loss-making enterprise.
Another important aspect of managing for profit is to know the value of your investment and sell at the right price.
This means you have to plan your sales such that you only dispose your animals when you can get the best from the market. Selling a beast to cover funeral costs, is not selling but problem solving. It is okay but you should still have your properly planned disposal which talks to your enterprise plans. In short, manage your enterprise so that it can foot its running costs and still declare a dividend.
Uyabonga umntakaMaKhumalo.
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