Beef contracts a must for winter finishers

By Justin McCarthy

Surely beef factories must now see importance of forward contracts as a necessity in securing adequate supplies of finished cattle for the forthcoming spring. Although the current strong beef price is a welcome development and must be regarded as a positive step it is imperative that the upward trend continues to secure a viable spring beef price in excess of 336c/kg (120p/lb) so that winter finishers receive an adequate return. Factory agents must now realise that unlike previous years when winter finishers have to buy stock to draw down premiums this year they have their Single Farm Payment cheque in the bank no matter how many cattle they decide to finish.

With the strong autumn beef price, finishers are seeing the price of store bullocks running in excess of €50-€100 per head above last years prices and therefore are facing a significant increase in the level of investment required to fill sheds.

If for example we take a farmer deciding to buy 100 bullocks this autumn for finishing in the Spring he is required to make an initial investment in livestock in excess of €100,000. Coupled with rising feed costs and interest charges the overall investment required will be in excess of €125,000. The question now is will these winter finishers, that provide a vital link in ensuring a year round supply of Irish beef, continue to invest vast amounts on money without having any clear indication from processors as to the end value of their stock and risk having to draw their SFP cheque to balance the books. Surely forward contracts are now a must in providing a guaranteed market price that will give farmers the necessary re-assurances to invest in stock this autumn.

Factories north of the border appear to have already identified this looming problem with reports of 218p/kg (340c/kg-121p/lb) having been offered to finishers for stock in early 2007. One factory in particular is reported to have entered into negotiations with meal compounders to secure a competitive meal price for their producers. There are also reports of factory agents starting to cold-call on farms in a bid to secure new suppliers.

Current trade

A strong UK and European beef trade sees factory agents continue to scour the country looking for cattle this week and despite best efforts prices continue to creep upwards. Although some of the factories in the Midlands, East and West tried to buy R grade cattle over the weekend at 280c/kg (100p/lb) they quickly reverted back to 286c/kg (102p/lb) with farmers refusing to sell. There are even reports of these same factories having been forced to pay 288c/kg (103p/lb) on Wednesday as both Euro Farm and Donegal continue to drive the trade paying from 292-294c/kg (104-15p/lb) for R grades and up to 303c/kg (108p/lb) for Us. Prices in the south continue to lag behind with factories continuing to quote 280c/kg (100p/lb) for Rs and 276c/kg (96p/lb) for Os. However with supplies continuing to tighten there are more reports of deals being done at 286c/kg (102p/lb) and 278c/kg (99p/lb) for R and O grades. Tight supplies of clean cattle have seen factories more anxious for cows this week and in the south prices have increased by (3-4c/kg) with O/P+ grades selling for 235-240c/kg (84-86p/lb) Further into the midlands R and O grade cows are selling for up to 264c/kg (88p/lb) with some deals being done at 252c/kg (90p/lb). Good continental type cows are selling from 257-263c/kg (92-94p/lb).

While some factories are refusing to pay above steer prices farmers have managed to secure 297c/kg (106p/lb) for R grades bulls and heifers.

Farmers meetings

The IFA have organised a round of producer information evenings to discuss, Beef prices, quality assurance, suckler policy and production techniques. The first meeting will be held next Monday 11 September at 8.30pm in the Farm Centre, Enniscorthy and will be attended by John Bryan (IFA) and Gerry Maguire (Slaney Foods). A second meeting will be in the Newpark Hotel, Kilkenny on the 18 September at 8.30pm and will be attended by John Bryan, Paul Nolan (Dawn Meats).