In this article, we look at the break-even prices required for farmers who operate suckler-to-beef systems or for beef finishers who purchase and bring weanlings to beef.
At the minute, confidence among beef farmers is low. Rising costs, factory prices and uncertainty surrounding Brexit – which is not too far away – are all playing on beef farmers’ minds.
Teagasc recently released its break-even prices for the forthcoming feeding period. Outlined below are two different finishing systems involving continental bullocks and heifers.
- System one: A 485-day finishing period, where bullocks are purchased weighing 300kg and fed a grass, silage and meal-based diet;
- System two: A 370-day finishing period, where heifers are purchased at 280kg and fed grass, silage and concentrates.
System one
Assuming that a 300kg bullock – fed grass, silage and meal – would come to slaughter after a 485-day period (first winter of 160 days; at grass for 200 days; and a second winter of 125 days), a 377kg carcass (685kg live weight) would be expected to be produced.
Within this period, Teagasc estimates the silage required for two winters at 9t. Concentrates are fed at a rate of 1kg/head/day for the first winter and a rate of 4.75kg/head/day for the second winter.
Looking at different purchasing costs, if the bullock was purchased at a lower ‘autumn 2018’ price of €2.36/kg (€708/head), this animal would need to achieve 406c/kg or €1,534/head to provide the farmer with sufficient funds to cover his/her costs.
If the bullock was purchased for €2.46/kg or €738/head, a price of 415c/kg or €1,564/head would be needed for the farmer to break-even.
Finally, moving to a higher purchase price of €2.56/kg or €768/head, the farmer would need to receive a price of 424c/kg or €1,594/head at slaughter.
These costs include variable costs at €616/head and fixed costs at €210/head. Therefore, total costs plus purchase costs gives us the break-even price.
Targeting a margin of €20/head, farmers are looking at somewhere in the region of 5c/kg extra on break-even prices.
System Two
Moving to a heifer-finishing system, if the farmer is finishing heifers over a 370-day period, a 280kg continental heifer would be expected to achieve a carcass weight of 296kg (550kg live weight).
The heifer would be expected to eat grass, meal (1kg/head/day for the first winter and 3.5kg/head/day for the second winter) and silage (3.5t for two winters) for 370 days.
Assuming a lower ‘autumn 2018’ purchase cost of €2.19/kg or €613/head, the beef finisher would require 363c/kg or €1,077/head from the processor at slaughter.
Taking an October purchase price of €2.29/kg or €641/head, this heifer would need to achieve a price of 373c/kg or €1,105/head to provide the farmer with sufficient funds to cover his/her costs.
Looking at the higher purchasing cost or €2.39/kg or €669/head, farmers finishing heifers would need a return of 383c/kg or €1,133/head to break-even.
Teagasc estimates that variable costs and fixed costs for this system stand at €320/head and €144/head respectively.
If a margin of just €20/head was targeted, an extra 6c/kg would have to be added to the break-even price mentioned above to allow for such a return.
Costs and efficiency
In a business where margins are extremely thin, farmers need to be as efficient as possible. Based on the above estimations, Teagasc assumes a high level of efficiency.
Good-quality grass and good grassland management practices are essential – especially in the above systems, as grass will make up a proportion of the animals’ diet and is our cheapest form of feed; grazing costs of €57/head were assumed for the above systems.
An excellent animal health programme is essential and Teagasc attributes €39/head for bullocks and €24/head for heifers to cover such associated costs. However, veterinary costs can be higher with poor management.
Transport and marketing of the bullocks and heifers was estimated at €39/head.
Factory prices
Looking at the bullock system first, these animals would be expected to be ready for slaughter in spring 2020, aged 24 months.
While this is still some time away, looking at prices achieved by R+3= bullocks in spring 2018 – during the week ending March 11, 2018 – average prices of 412c/kg were recorded; the highest price paid by processors was 417c/kg and the lowest price stood at 403c/kg.
Also Read: Bull beef: What price do I need to just break-even?Moving to the heifer system, these animals would be fit for processing in November/December 2019, aged 20 months.
Prices, for R+3= heifers, during the week ending December 3, 2018, averaged 416c/kg. The highest price achieved by heifers during that week was 424c/kg, while the lowest was 390c/kg.