How much should beef farmers pay for bull calves from the dairy herd?

Ireland’s dairy-beef industry has found itself propelled into the fast lane. Since the quotas were abolished in 2015, the national dairy herd has increased in size.

As a result, there has been a proportional increase in the number of dairy calves coming on stream for beef production.

Therefore, as calving kicks into gear on many dairy farms across the country, many beef farmers – who operate dairy-beef systems – will be in the market for calves over the coming weeks.

Speaking at an event in Co. Kilkenny last night (Tuesday, January 15), Teagasc’s head of Drystock Knowledge Transfer Pearse Kelly outlined that there is money to be made from these systems; but advised farmers to proceed with caution when it comes to the price they are paying for calves.

Looking back over the last eight years, Pearse highlighted that there are 40% more calves being born in the dairy herd now than there were in 2010.

However, there are beef x dairy calves being born too. And, if we compare 2018 to 2010, there is a 72% or 275,000 head increase in the number of these calves coming on stream.

Pearse outlined that these are relatively low-cost systems to get into.

“Farmers could go out and buy 50 calves for very small money, but you will very quickly spend €50,000 on those 50 calves; but they can be profitable when you hit key performance targets.”

Profitable calf-to-beef system:
  • Excellent management required from start to finish;
  • High output required;
  • Excellent calf-rearing skills;
  • Good health and vaccination plan;
  • Excellent quality silage required;
  • Weight gain from grass maximised;
  • Meet weight for age and market specs;
  • Pay an appropriate price for calf.

During the presentation, Pearse also outlined the financial performance of the 10 farms involved in the first phase of the Teagasc Green Acres Calf to Beef Programme.

Also Read: Teagasc Green Acres Calf to Beef: What was the financial performance of the 10 farms?

Which system?

Pearse outlined which production system is leaving more money in farmers’ pockets and which system is at the top of the ladder in terms of profitability.

Systems:
  1. 28-month steer beef;
  2. 24-month steer beef;
  3. 20-month heifer beef – profitable/risky;
  4. 20-month bull beef – risky/avoid;
  5. Under-16 month bull beef – avoid.

“Finishing Friesian bull calves – under-16 months – coming from the dairy herd is completely unprofitable; the costs are too high. 20-month bulls that go back to grass are risky, but there is money to be made. However, farmers need to be careful and should work closely with their factory.

“20-month heifers – Angus or Hereford heifers – born in February or March and killed the following year off grass with no second winter are profitable.

“But, it really depends on what price you pay for those Angus/Hereford calves; you need to be getting into a 270-280kg carcass which can be hard.

“The system which comes out on top consistently is putting steers back out to grass for a third season. Costs are reduced – especially meal costs because you are not trying to finish them over the winter period.”

However, Pearse highlighted that not as many can be finished per hectare, but higher carcass weights can be achieved.

Touching on calf-to-store system, he outlined that farmers should really concentrate on bringing these calves to beef.

“Farmers buying calves for €100 and selling them for €300 is not sustainable; therefore, calf-to-store systems are risky business and farmers really need to be in it for the long haul.”

How much are calves worth?

The following analysis is based on a net margin figure of €200/head before support payments. To make €200/head, what price does the carcass value have to be? And what price does the cost of production have to be?

Using research information from the national database over the past five years and information from Teagasc Johnstown Castle, Teagasc Grange and the Green Acres Programme, a Friesian bull calf – finished under a 24-month steer system – will achieve a 316kg carcass (O- 3+) on average.

Turning to the price grid in the factories, Pearse highlighted that this leaves that animal somewhere in the region of -20c/kg versus the base price.

Aberdeen Angus / Hereford steers come in at 316kg (O+ 3+) on average and there are small bonus schemes available. Including the quality assurance (QA) payment this leaves that animal at +6c/kg versus base price.

In addition, the cross-bred steers come in at -28c/kg versus the base price. These steers kill out at 280kg (P+ 3+).

Moving to variable costs of production, the Friesian steer comes in at €744, while the Angus/Hereford steer amounts to €696 and the cross-bred steer hits €688.

Taking fixed cost at €233/head – based on a stocking rate of 2.5LU/ha – the total costs of production for the three different breeds – under a 24-month steer system – amount to €977/head (Friesian), €929/head (Angus/Hereford) and €921/head (cross-bred).

Therefore, the value of a Friesian bull calf based on a base price of €4.00/kg, €3.90/kg and €3.80/kg in the factories is as follows:

Targeting €200/head profit with a 316kg carcass (O+ 3+) and €977/head cost of production:

(Carcass weight x base price) – (€/head profit + cost of production) = average calf value:

  • (316 x (4.00c/kg – €0.20c/kg)) – (€200 + €977) = €24/head;
  • (316 x (3.90c/kg – €0.20c/kg)) – (€200 + €977) = -€8/head;
  • (316 x (3.80c/kg – €0.20c/kg)) – (€200 + €977) = -€39/head.

“I’m not trying to talk down the price of calves, but there needs to be a sense of reality when it comes to the prices paid for calves,” Pearse explained.

Genetics

Continuing, Pearse said: “All calves of the same breed are not the same. A black calf looks like a black calf, but it really comes down to their genetics.

“What we are seeing through research, is that there is massive difference in the genetics of those calves,” he added.

How does this impact on profitability?

It is common knowledge that the expanding dairy herds are looking at easy calving, short-gestation bulls, but that’s coming at a cost of beef production.

“In 2014, almost 12% of Angus-sired steers out of Friesian dams were equal to or under an O-. By 2018, the 12% has risen to almost 21%.

“A similar story can be seen with the Friesians; it’s gone from 59% to nearly 71%. Therefore, there is a reduction in the quality of calves coming from the dairy herd.

“This needs to be addressed on the dairy side. At the end of the day, if they want beef farmers to take these calves things need to change.”

Pearse also highlighted research from Teagasc and ABP where the effect of different Angus sires on carcass weight, carcass confirmation, carcass fat and kill-out % was investigated.

The difference between the best (FPI) and the worst (JYK) sire on average carcass weight amounted to a difference of 53kg. Taking a price of €4.00/kg, this equals a difference of €200/head.

Pearse also touched on the new Dairy-Beef Index which will be launched later this month by the Irish Cattle Breeding Federation (ICBF). This will aim to help dairy farmers use better beef bulls, while not compromising a huge amount on calving difficulty.

“Beef farmers need to ask: ‘What are the sires of the calves they are buying?’ If there is a €200/head difference between one black calf and another, that’s too big a difference to leave behind.”

Conclusion

The national dairy herd already amounts to approximately 1.4 million cows which has resulted in a “tidal wave” of calves coming on stream.

And, all roads point to this figure increasing by 2020. Therefore, times are changing and – whether we like it or not – a lot of these calves will end up on beef farms.

Also Read: What 10 key areas are vital for a successful dairy calf-to-beef operation?

Therefore, in summary, Pearse highlighted that well-ran dairy calf-to-beef systems are profitable. However, farmers must choose their system carefully and set out targets that are achievable. For example, avoiding certain systems – such as an under-16 month bull system – is important.

In addition, farmers must base the prices they pay for calves on realistic production costs and expected beef price. Furthermore, knowing the sire of the calves selected for beef production will reduce a lot of the risk when it comes to these systems.