Gross margins on beef finishing farms to fall by 5% – Teagasc

On Tuesday, August 4, Teagasc released its mid-year update for 2020. In this article, we will look at the findings in terms of beef production.

Firstly, supplies decreased by 3% in the first half of the year. This is mainly due to the onset of the Covid-19 pandemic – in particular the closure of the European foodservice industry.

It is predicted – provided there is no repeat of the spring 2020 Covid-19-related shutdown – over the course of the full year, production is forecast to end the year 2% lower.

In terms of finished cattle prices, these are predicted to be 4% lower in 2020. Both EU demand and supply have contracted in response to the coronavirus, with the pandemic-related recession now affecting the UK and Europe and – as a result – decreasing demand.

On a slightly more positive note, the cost of production is set to decline in line with lower feed, fertiliser and energy costs – offsetting the lower prices available at the factory gate somewhat.

Also Read: Fertiliser prices down dramatically; sales increase

Beef feed sales declined in the first three months of 2020 by 14% when compared to the same period in 2019.

This decrease coincides with a further decline in cattle numbers, but also perhaps reflecting weaker demand due to pressure on margins associated with lower cattle prices.

In 2020, it is estimated that beef feed use will be lower than in 2019.

The value of beef sold out the farm gate will be supported by the announcement of the €50 million Covid-19 related payment – the Beef Finishers Payment (BFP) – targeted at beef finishers, which was announced last night. However, despite this support, overall output value is still expected to decline.

Finally, even with lower direct costs, gross margins/ha on suckler and beef finishing farms are forecast to fall by 1% and 5% respectively.