Analysis: Current beef price at €3.50/kg leaves all suckling systems loss-making
Last night, Tuesday, September 3, Teagasc and the Irish Farmers’ Association (IFA) held a beef seminar in Co. Kilkenny.
The message from this event was clear – farmers need to “batten down the hatches”, as one speaker explained, and “cut costs wherever possible”.
This message was reiterated by Teagasc’s head of drystock knowledge transfer Pearse Kelly, who outlined that all suckling systems – based on the current beef price of €3.50/kg available at the factory gate – will be loss-making.
During his presentation, he outlined the total cost of rearing a suckler calf from birth through to slaughter. The analysis was based on 2018 eProfit Monitor figures from suckler-to-weaning / store enterprises and Teagasc beef budgets (2018/2019).
So, for a bull calf, how much does it cost to keep the cow firstly and, then, carry this calf through to slaughter as a steer at 24 months – aiming for a 337kg carcass? The following analysis is based on a high level of efficiency.
Firstly, the total cost to keep the suckler cow is €746 – assuming a performance of 0.95 calves/cow/year. Meanwhile, the total cost to finish the steer is €826.
Therefore, the total cost from birth to slaughter is €1,572. So, if we divide the total cost by the carcass weight, the breakeven cost is revealed.
So, as a result, for the cow to breakeven, we’d need a factory price of €4.17/kg when that steer is slaughtered at 24 months – a far cry from the €3.50/kg on offer today.
Secondly, looking at the price needed by heifers to breakeven, aiming for a finishing age of 20 months and a 296kg carcass, the total cost to keep the cow is €746.
Meanwhile, the total cost to finish the heifer is €464, so the total cost from birth to slaughter is €1,210. Therefore, for the cow to breakeven, we’d need a factory price of €4.09/kg when that heifer is slaughtered at 20 months.
The above prices are just breakeven figures; if a farmer targeted a net margin of €100/cow (based on 50% bull calves and 50% heifer calves), the price required would rise to €4.43/kg.
Targeting a net margin of €200/cow, the price needed at the factory gate would need to amount to €4.72/kg. However, farmers operating in the top third of the country would need a price of €4.07/kg or €4.36/kg, respectively.
Looking at the current beef price (€3.50/kg), Teagasc analysis indicates that – assuming a QPS payment of 12c/kg and a grid payment of 6c/kg – the suckler-to-beef farmer is making a net loss of €151/cow.
Should I sell or hold on to my weanlings in the current market climate?
Pearse also looked at the possibility of not selling weanlings into the current marketplace, and holding on to them until next March. Would this be a viable option?
For the purpose of this analysis, Pearse valued a 350kg weanling at €2.00/kg. Therefore, the price of that weanling today in the mart would be €700.
To keep that same weanling for 150 days, total costs would amount to €223. These can be broken down as follows: silage (good quality) €120; meal €68; marketing and transport €20; vet and dosing €15.
So assuming that weanling will weigh 440kg next March, in order to breakeven a beef farmer would need a (live) price of €2.10/kg. In order to make a gross margin of €50, that weanling would need to achieve €2.21/kg.
However, Pearse said: “Will Brexit have changed [things] around by then? Will the market deliver better returns? These are all unknowns and no one can answer those questions.”
- Efficiency still pays;
- Current beef prices make all suckling systems loss-making;
- A low beef price strategy has to “cut all cost wherever possible”;
- Reduce meal bills; cut out meal where you don’t need it;
- Have a very basic fertiliser programme;
- No reseeding; this has a cost €300-350/ac – current beef prices do not justify this;
- No new investment in machinery or stock;
- Cut maintenance costs to the bare essentials;
- Examine all health costs critically;
- There are small margins to be made by not selling weanlings until spring.