Newford Farm, the 100-cow suckler to beef demonstration herd located in Athenry, Co Galway, is over halfway through its third calving season. Excellent breeding performance in 2016 set the foundation for over 70% of cows calving inside the first four and a half weeks in 2017.

While calving rate and output from the herd that is utilising first-cross Angus and Hereford replacements from the dairy herd is good, a review of the financial performance does not make as good a reading.

Positive output was outweighed by relatively high variable costs, much of which stemmed from weather-related costs and challenges. The net outcome when fixed costs are taken into account is that the business lost about €22,000 in 2016. This figure includes casual labour but does not include the farm manager’s wage. There is no land rental charge for the farm but there is also no Single Farm Payment with the only direct aid being the BDGP programme return of about €8,500.

Farm performance

A key driver of calving performance, good stockmanship has resulted in 85 live calves on the ground at the start of this week, from 82 cows calved. This includes four sets of twins and mortality to date is brilliant with only one case of mortality in a heifer that calved before time.

Inclement weather presented challenges in getting cows and calves and 2016-born progeny released to grass up until the start of the week. Along with higher costs, this also increased labour but is now thankfully changing with more stock going to grass.

Weather-related challenges increased costs last year with delayed turnout also occurring in spring 2016 and leading to earlier housing of stock last autumn.

Financial review

The knock-on effect of these weather-related challenges has increased costs in some areas of the business, which has eroded the gains achieved in physical performance in 2016. Reviewing the 2016 Teagasc eProfit Monitor for the farm is a tale of two halves. Gross output was positive with sales of €107,861.

Purchases and inventory changes largely cancelled each other out, leaving the farm with a gross output of €110,014 or €1,972/ha over the 55.8ha grazing area.

The driver of this performance was the farm’s 60,326kg of output, or 1,081kg/ha, the basis of which is the farm’s high stocking rate of 2.89LU/ha. This was achieved through a combination of more animals available for sale but more so by increased carcase weights of 2015-born steers and heifers.

Slaughter performance of these animals is listed in Table 1. It should be noted that four out of six loads of cattle were slaughtered in 2016 with the remaining two loads slaughtered in January 2017.

The 10kg higher steer carcase weight and 16kg higher heifer carcase weight compensated for a 15c/kg lower steer price received and a 22c/kg lower heifer price achieved with the overall sale value of progeny slaughtered on a per head basis similar to the year previous.

Higher costs

As touched on earlier, the higher performance achieved did, however, come at a significant cost.

Animal performance suffered in the period from June to September where average rainfall levels were 93.3mm from June to August, while 138mm of rain fell in September. Steers averaged 0.8kg over the summer while heifers averaged 0.73kg liveweight gain.

Hitting 0.2kg higher targets over 200 days at grass would have resulted in animals gaining at least 40kg more liveweight at a much lower cost.

Instead, animals were housed on 21 September at an average weight of 543kg for steers and 494kg for heifers. Only a handful of cattle were slaughtered off grass before housing, well short of the blueprint for the farm of about 80% of heifers and over 50% of steers slaughtered off grass. Achieving this target will be a difficult goal, but avoiding an indoor finishing period is crucial to keeping variable costs at levels budgeted for 2017. A potential lower carcase weight from an earlier slaughter date will hopefully be cancelled out by earlier calving with 66 cows calved in February 2017 compared with just 20 in 2016.

Once housed, feed costs increased immediately with animals offered ad-lib silage along with 6kg concentrates up until 1 December, rising to 8kg concentrate thereafter. This was a contributor to the purchased concentrate cost of €14,840 or €266/ha as shown in Table 2.

The fact that the majority of finishing cattle were housed had knock-on management consequences for weanlings. Weanlings were housed from October to mid January and the straw-bedding cost alone amounted to over €150 per week.

Cutting costs

Variable costs at €1,532/ha are excessively high, leaving a gross margin of just €432/ha. The focus in 2017 is to reduce costs by €500/ha and, if possible lower, with a target for the system to maintain variable costs at 45% to 50% of gross output. Along with straw, the other standout cost is veterinary. At €13,489, or €242/ha, it was over €4,000 higher than the previous year.

The overall cost can be broken down into €4,572 spent on vaccines, €5,361 on veterinary medicines, €1,706 for call-outs, €1,373 for a herd test fee and €477 on wormers. Call-outs, a herd test fee and wormers are within the normal range for a 100-cow suckler herd.

The vaccination programme is high but is difficult to quickly reduce. Vaccinations for IBR, leptospirosis, calf scour and salmonella are all veterinary recommended, as is pasteurella. The vaccine programme is being reviewed as at their current high cost something will have to give to reduce veterinary costs. A large portion of veterinary medicine costs are attributed to an outbreak of cryptosporidium scour in calves in spring 2016 with E coli mastitis in four cows accruing costs of over €1,200.

This is a downside of first-cross dairy cows with a high milk yield potential and is the reason for not reducing straw usage around calving. Management practices are being tweaked and practices such as liming down slats in late pregnancy and liming high-risk areas in straw-bedded sheds seem to be delivering in 2017. A focus on slaughtering animals off grass will also reduce straw usage.

Other costs that should come more into line in 2017 are contractor ‘‘other’’ costs, which are largely related to heifer-rearing costs. A trailer is being purchased in 2017 to reduce long-term transport costs. If a higher percentage of cattle can be slaughtered off grass, a bulkier cut of silage can also be harvested for suckler cows, the grazing season can be extended for weanlings and both combined should reduce silage costs. Fewer animals housed will also reduce slurry spreading costs, while AI and breeding costs will be significantly reduced by a switch to DIY AI and establishment costs being covered in 2016.

Fixed costs for 2016 and those budgeted for 2017 are detailed in Table 3. The cost for hired labour relates to relief help around calving and breeding and at weekends. Machinery running costs are attributable to tractor leasing and operating (diesel) costs. These are reducing in 2017 with the purchase of a tractor and this is being accounted for in the interest charge and higher depreciation costs. The loan interest cost is estimated at €12,000 at present but may change with varying capital costs. The other significant cost is depreciation on buildings.

Fixed costs are budgeted at about €740/ha in 2017, which again in the context of delivering a margin after all costs are taken into account stresses the importance of reducing variable costs and increasing the farm’s gross margin. The long-term financial target is a gross margin of €1,170/ha in 2019 and a net margin of €520/ha.

The area farmed is increasing by 4.86ha in 2017. The farm is losing 7.28ha of land located at the Raheen block due to a new school being built and this is being replaced by renting a 12.14ha block about seven miles away from Newford. Access to additional lands will also lower the stocking rate from 2.89LU/ha to the target of 2.7LU/ha.

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Editorial: contrasting fortunes – dairy v sucklers