Market for Irish veal growing

By Justin McCarthy

Despite concerns over the impact of the credit crunch on consumption, Rose veal production in Ireland continues to grow.

While the production system is still in its infancy, Buitelaar farms, in partnership with Slaney Foods, are now rearing and processing up to 100 Rose veal calves each week to serve markets in Scandinavia, France and Italy.

From the farmers' perspective, the system is unique in that they know exactly what price they are going to get for the finished product before they buy the reared calf.

It is then down to them to bring the three-month-old calf at 110kg to 120kg through to a slaughter weight of 380kg at 10.5 months as efficiently as possible. The only restriction is that the calf cannot be fed grass or grass silage as this will affect the colour of the meat.

Production system

Farmers who decide to go down the Rose veal route are supplied with weaned calves at 12 weeks of age. On average, calves are sold onto the finishing farm at €170 over their weight, or at an average of €280 per head.

However, the price charged to the finisher will vary, depending on the purchase price of the 10-day-old calf. Before moving off the rearing unit, all calves are vaccinated against pneumonia and treated for lice. They remain on the finishing unit for about 7.5 months and are either housed on straw or slats.

Finishers are free to formulate their own ration, with some including a high percentage of maize silage in the diet, while others opt for the ad-lib concentrate route. On the maize silage and concentrate system, calves consume, on average, 1.8t of maize plus 600kg of concentrate while the ad-lib diet requires 1.3t of concentrate. During the first part of the feeding period, the crude protein of the diet is 16%, dropping back to 14% for the final three months.

During their time on the finishing unit, the calves will be weighed twice to ensure that growth rates remain on target to reach a slaughter weight of 380kg at 10.5 months. The average killout percentage ranges from 51% to 53%. When ready for slaughter, calves are cleared out in one week so as to allow the farmer to clean out sheds and re-stock quickly. This quick turnaround allows for three batches of calves to pass through the sheds over a two-year period. All stock are slaughtered and paid for by Slaney Foods.

Margin

At an average selling price of 320c/kg, a finished calf is worth €640 per head at 200kg deadweight. This leaves a margin of €360 per head over the purchase price. Table 1 outlines the direct production costs incurred on the finishing unit. The figures in brackets denote the higher input prices.

On the ad-lib concentrate finishing system, the margin is €78 per head when concentrate prices are costing €175 per tonne; at €200 per tonne, the margin drops back to €46 per head. The maize silage plus concentrate diet fares better at €129 per head. But, if maize was costing €50/t to produce and meal was costing €200/t, the margin per head would fall to €96 per head.

Ultimately, the decision on which finishing option to select is based on ration price. If a mixed ration could be sourced for €150 per tonne, then the margin per head on the ad-lib concentrate diet would increase to €111 per head.

Is the margin over direct production costs adequate? Well, this is the question that only the finisher can answer as not everyone puts the same value on their time. In my opinion, for the proposition to be viable, on finishing units that do not have access to maize silage, the ration must be costing less than €160 per tonne delivered.

There is no doubt that the system is ideally suited to the tillage farmer who has access to cereals at first cost and can grow maize as a break crop. On these units, the slurry produced will also be a valuable asset.

The figures show that there is potential for these units to achieve a margin of almost €130 per head over direct production costs provided that performance targets are achieved. This equates to a margin of 57c/kg per head per day. On a unit carrying 200 calves, this equates to a return of €798 per week.

As I say, it is down to the individual finisher to assess if this is adequate. In my view, on a well laid out unit, this would equate to a return of almost €40 per hour as the system will not tend to be labour intensive - at 13 weeks of age, most of the hard work will have been done. Another way of assessing the economic return is that a finishing unit with capacity to hold 200 bulls has the potential to generate an annual income of €30,000 per annum.

I have purposely ignored fixed costs as these are variable to the individual unit.

It would be down to the finisher to calculate the fixed costs, such as depreciation, labour, maintenance, electricity, etc.

Adam Buitelaar, managing director of Buitelaar farms, admits that farmers who go down the Rose veal route will not become millionaires overnight. However, he argues that the system offers an exceptionally good return on investment compared with conventional beef finishing systems.

Another important factor is that a lot of the risk has been removed from the production system as finishers receive a contract price for the finished animal prior to buying the calves.

Therefore, they can calculate their margin per head, based on their own input costs, before investing.

Future of Rose veal

Slaughtering approximately 100 calves per week, the Rose veal market is still exceptionally small in the grand scale of things. However, is there potential for it to grow? Adam Buitelaar is confident that there is no reason why production cannot increase to over 300 calves per week over the next few years.

He is of the view that the credit crunch could see demand for Rose veal increase as people trade down from buying higher priced white veal.

According to Buitelaar, Ireland is still an exceptionally small player in the market with Holland slaughtering 20,000 calves per week.

My view is that the security of a contracted price will appeal to some tillage farmers or finishers with facilities to feed large numbers of stock at a competitive price. Ultimately, Slaney Foods' strong commitment to the system, in offering a guaranteed price, will allow finishers to make their own decision on the viability of the system. Slaney should be commended for giving this commitment.

If you wish to get further information on Rose veal production, you can contact Frank Cullin on 086 2600624.

Table 1: Direct production costs on the finishing unit.

	Ad- lib concentrate	Concentrate plus maize silage
Maize silage @ €40/t (€50/t)	N/A	€72 (€90)
Concentrate @ €175/t (€200/t)	€228 (€260)	€105 (€120)
Straw (for feeding)	€10	€10
Vet/mortality	€12	€12
Marketing transport	€32	€32
Total	€282 (€314)	€231 (€264)
Calf purchase price	€280	€280
Value of finished bull	€640	€640
Margin over direct production costs	€78 (€46)	€129 (€96)
Figures in brackets denote higher input prices