AGRICULTURAL
What determines risk and profitability?
A feedlot uses animals to produce carcasses or meat as the end product and to increase
value. The profit, as in any other enterprise, is determined by the difference between
input costs of the production process and income of the end product(s). Various
financial, biological and physical factors fluctuate continuously which causes risk. The
primary focus of a feedlot manager is therefore, risk management.
By Dr Kobus Swart
Animal Nutrition Specialist
A
feedlot is an intensive animal
production system where a
number of financial and pro-
duction risks can be manipu-
lated and controlled to a more or lesser
extent. Internal risks at the feedlot, can be
controlled much easier and external risks,
largely enforced onto the feedlot, are
more difficult to manage.
INTERNAL RISKS
Internally the most important risk is the
skills of the manager. The success of
the production process in a feedlot is
determined by the day in and day out
implementation of correct decisions by
everyone involved in the management.
The following aspects will have the big-
gest impact on internal risks:
Operational risk: Every activity at a feed-
lot must be carried out by personnel. The
quality of personnel is therefore critically
important. Poorly trained and unreliable
personnel significantly increase the risk of
particularly intensive production systems.
Various duties have to be executed accu-
rately and routinely on a daily basis and
every member of staff must understand
the purpose behind every duty and must
be able to execute it independently.
Design and maintenance of facilities:
The design and maintenance of facilities
and equipment to operate effectively, are
essential. As soon as facilities are inade-
quate and function poorly, it is becoming
more difficult to maintain or increase pro-
ductivity and to manage risk.
Nutrition: The feeding of animals is a
24-hour responsibility and it is also the
single largest cost in a feedlot. Various
aspects relating to nutrition can vary and
contribute to risk. The price of raw mate-
rials, particularly energy (grains), is of
The correct decisions have to be taken to
acquire the right combination of raw mate-
rials, to formulate and mix the correct feed
in order to ensure maximum digestibility,
feed intake and production of a carcass.
A number of factors in this process can
vary and contribute to risk.
Health: A feedlot uses live animals which
have to be healthy to produce optimal-
ly. Sick animals do not produce well.
Intensive production systems increase
stress, which impacts negatively on immu-
nity and therefore on the health of the
animal. Animals must be vaccinated and
dewormed at the beginning of the feedlot
period and also adapt to the intensive
and stressful circumstances. Early iden-
tification and treatment of sick animals,
effective adaption of animals to high ener-
gy feed and intensive social conditions,
decrease the risk of poor health.
Productivity: The performance of a feed-
lot is measured in terms of growth perfor-
mance (GDT), slaughtering percentage or
carcass production, end mass or total vol-
ume of meat produced, feed conversion
and grading or quality of carcass. The
productivity has a direct and significant
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SENWES SCENARIO | SUMMER 2018
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