What level of profitability can beef farmers expect if they acquire dairy calves for free?
The price that beef farmers can afford to pay for dairy bull calves has been a major talking point in recent weeks.
It was up for discussion again at the first farm walk as part of the second phase of the Teagasc Green Acres Calf to Beef Programme in Co. Kilkenny – which took place on the dairy calf-to-beef enterprise of father-and-son duo Thomas and Peter O’Hanrahan – on Thursday last.
Teagasc’s Pearse Kelly outlined the level of profitability beef farmers could achieve – based on current beef prices – if they acquired Friesian and Aberdeen Angus bull calves for free from dairy farmers.
Starting this discussion, he said: “It’s really down to what profitability you are targeting. If you take the Friesian bull calf for example, there’s a lot of things we do know. Friesians – after two years at a high level of efficiency – are killing into an average of a 316kg carcass.
“On average, those animals are grading at O- and 3+,” he added.
Pearse acknowledged that 50% of these will grade P, but noted the rest will grade O, with the odd R-grade achieved. But, on average, these animals will grade O- and 3+.
This is based on research learned from the national database over the past five years, along with information from Teagasc Johnstown Castle, Teagasc Grange and the Teagasc Green Acres Programme.
“The other thing we do know from research is that it takes €977 to bring a Friesian bull calf – assuming a reasonably good stocking rate (2.5LU/ha) – to beef at 24 months-of-age.”
The €977 costs are assuming a high level of efficiency, good-quality silage, good animal health and grassland management.
So, if farmers can get the calf for a €0 value, what is the profit they are likely to make on that animal in the two-year period?
- Carcass weight x base price = total value;
- 316 x (3.50c/kg – €0.15c/kg) = €1,059;
- Total value – cost of production = potential margin/head;
- €1,059 – €977 = €82/head.
50% of the calves of the farmers involved in the Green Acres programme were Friesian bull calves and the average price paid was €69/head.
So, for example, if this is the average price paid again in spring 2020, the potential margin/head would be €13/head – if the price of beef is €3.50/kg.
“Obviously, we hope the price will be better, but you have to stand back and look at the figures and say – at current beef prices, if they are there, what level of profitability can I achieve?”
Looking at the potential margin/head on Angus and Hereford bull calves, Pearse highlighted that if these were acquired at a €0 value next spring, you’re looking at a profit of €218/head, at current beef prices.
“However, if you paid €200 for the Angus bull calf – which was typically what farmers were paying for these calves – you are basically wiping out the profit, if the base price stays at €3.50/kg,” he concluded.
Relationships need to be formulated between dairy and calf-to-beef farmers to ensure that a viable business structure can be created, where the dairy calf-to-beef farmer can secure an appropriate margin and the dairy farmer is provided with a suitable outlet for their calves.
At current beef prices, most dairy calves – with the exception of continental-cross calves – will only have a value when they are reared.