Can winter finishing deliver any margin for beef farmers in 2020?

Beef finishers will struggle to breakeven this winter due to low factory prices, recent figures presented by Teagasc’s head of Drystock Knowledge Transfer Pearse Kelly have shown.

Speaking at a Beef Seminar organised by Teagasc and the Irish Farmers’ Association (IFA), Pearse’s 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.

Also Read: Analysis: Current beef price at €3.50/kg leaves all suckling systems loss-making

He also outlined updated values of calves coming on stream for beef production from the dairy herd based on factory gate prices of €3.40/kg, €3.50/kg and €3.60/kg.

He revealed figures which show that steer finishers will require €4.21/kg to breakeven and to cover the purchase price and cost of production.

This figure is significantly higher than the current quotes being offered to farmers, as most beef plants are operating off a base price of €3.45-3.50/kg for steers.

Continental steer finishing system – 530kg store

  • Bought at 530kg at €2.15/kg or €1,140/head;
  • Sold at 670kg (375kg carcass);
  • High level of efficiency.

Pearse explained that budgets were carried out using concentrate costs of €240/t and silage (good quality) costs of €30/t. Transport and marketing costs (on a per-head basis) were taken at €42, while health costs amounted to €8.

In addition, for the purpose of this analysis, fixed costs and loan interest were pegged at €87.

Based on a store price of €2.15/kg, the 530kg forward store would cost €1,140 to bring into the system and would be finished over a 140-day period (ADG of 1kg/day) on a good-quality silage and concentrate (4.5kg/day) diet.

This steer would need to return in the region of €1,579 or €4.21/kg at slaughter – at a carcass weight of 375kg – to cover all costs associated with this system.

However, to make a net margin/head of €50, €100, €150, €200, the beef farmer would need a €/kg return of €4.34/kg, €4.47/kg, €4.61/kg and €4.74/kg, respectively.

Store and finish next summer (2020)

Would it make economical sense to store this steer over the winter on a silage-only diet, and finish it in late June or early July at 720kg (liveweight) or 405kg (deadweight)?

In this scenario, the steer would be stored for 140 days achieving an ADG of 0.5kg/day (+70kg), before returning to grass for 120 days, gaining 1kg/day (+120kg).

Pearse highlighted that the total production cost for this system would amount to €534.

When you add the total cost of production to the purchase cost of the steer, the total cost amounts to €1,674, so the breakeven price needed next summer would be €4.13/kg.

“Last spring, the price for R3 steers hovered around €3.90/kg, and the previous spring it hovered around €4.05-4.10/kg including VAT,” Pearse explained.

When it comes to net margins, a beef farmer looking for €50/head, €100/head, €150/head or €200/head would need a €/kg price of €4.26/kg. €4.38/kg, €4.50/kg and €4.62/kg respectively.

Teagasc key messages from the event:
  • With beef prices significantly below the costs of production, most costs have to be examined or cut;
  • Suckler systems cannot make a profit at €3.50/kg;
  • Dairy-bred beef calves would only have a value next spring – at current beef prices – when they are reared;
  • Winter finishers need some signal of an increased beef price next spring, otherwise it will be loss-making again;
  • Storing steers over the winter and finishing next summer allows more time for a price rise.