By Alan Dillon, Teagasc beef specialist and Green Acres Calf to Beef programme manager
Current market conditions which Irish beef farmers are experiencing could never have been foreseen, with Covid-19 playing havoc with finished beef prices and eliminating the markets connected to the hospitality trade.
Farmers are now left with finished beef prices which languish well-below the cost of production and have a large number of issues to deal with in the short-term, while they wait for a picture to emerge as to how or to what level the beef market will function for the next 12-24 months.
The main issues arising are around cash-flow, reigning in the cost of production, the system of farming and planning for the future size of the farming operation. Other issues involve being able to move stock on at the required times – either live or as finished cattle.
Beef prices
At the moment, beef markets are at their lowest point in years and farmers are receiving much lower returns than anticipated this spring.
Live cattle prices – on the other hand – have so far remained relatively strong with good-quality store cattle achieving relatively strong prices which are comparable to live prices received when finished beef prices were much higher than at current levels.
This leaves farmers with options to sell stock live at between 12 and 20 months off grass and eliminate the risk of investing €300-400/head into finishing a steer or heifer the following spring.
Farmers may look to cash in stock at yearling stage now to grass buyers or else take the risk of carrying them for the summer months and achieve cheap live weight gain, while hoping markets will have stabilised by the autumn.
It may be the case that reasonable prices received for yearling stock now are a better bet than gambling on autumn prices holding – especially if income has been hit already this year on lower than expected stock sales.
While this strong live price is good news for those with cattle to sell, those buying these cattle need to be cautious regarding their expectations on beef prices when stock will be fit for slaughter and do their sums carefully.
Cost of production
While the costs in many areas of production cannot be skimped on, such as herd health, there are other areas where costs can be saved in the short-term.
Investment in areas such as drainage, roadways, reseeding and new buildings or machinery should all be postponed unless unavoidable.
However, some areas of investment such as liming of land give an instant return on investment and should be continued.
Every beef farmer needs to sit down and complete a budget for income and expenditure based on lower than expected beef prices and plan out where money will be spent for the rest of the year.
System of production
There are a number of farmers feeding cattle in sheds currently targeting a late spring slaughter. The question being asked is:
With prices dropping weekly to levels which won’t leave a margin for the farmer, should they instead stop feeding meal to cattle and turn them back out to grass targeting a late summer or early autumn slaughter?
The advice would be that if cattle are within a month to six weeks of slaughter – and have been built up to a high level of meal feeding (6-10kg/day) – it is better to continue to feed onto slaughter.
If cattle have not been built up to high levels of meal feeding – and farmers can handle the lack of cash-flow in the short-term and have enough grass – then this may be an option to allow cattle to gain cheap weight at grass and give the market time to settle.
Farmers finishing bulls under 16-months have little options only to push on to finish and the best advice here would be to maintain contact with your processor regarding stock coming near fit for slaughter and weight limits.
Cash-flow requirement
Moving from a spring sale to an autumn sale presents obvious challenges in terms of cash-flow on-farm. If farmers are considering this option, talking to your bank may be well advised in terms of increasing overdraft facilities until stock are sold.
Banks may also need to be brought into discuss existing loan repayment commitments due to lower than expected returns from finished cattle.
Table 1 (below) shows the effect of moving towards a summer or autumn finish off grass compared to a spring finish in March out of the shed.
Table 1
While a beef price of €3.40/kg and €3.30/kg has been assumed, farmers will have to wait and see what effect Covid-19 has on markets and how this squares up with beef prices as the summer progresses.
What the table shows is that farmers can manage a lower beef price off grass in the summer or autumn much better than in springtime after an expensive winter finishing period.