For beef farmers that purchase stores in spring to graze and finish this winter, higher input costs will also mean the market has to return a strong beef price to break even.
Farmers running a store to beef set up should complete some form of budget on what they are likely to pay for cattle, the typical inputs used and the sale price required.
Take a farmer buying 25 top-quality continental yearling heifers which will go straight to grass and are rotationally grazed on 15 acres of productive land which is owned.
Heifers are purchased around 1 April annually and average 400kg liveweight. Purchased at 260p/kg, heifers cost £1,040/head with a simple comparative budget outlined in Table 1.
Fertiliser used is normally four bags/acre of CAN. In 2022, nitrogen was purchased at £600/t and brings grazing costs to £1,800 or £72 per head.
Heifers are grazed to 1 October and gain 170kg over the 183 day period at grass, bringing the cost per kilo of liveweight gain to 42p/kg.
Concentrate is offered at 2kg/day for 14 days prior to housing. Assuming a simple beef finishing ration costing £330/t in September, it comes to £9/head.
Animals get two worm drenches, one on 1 June and again on 1 August, which comes to £10/head. Miscellaneous costs of £20/head are also included.
Monthly fixed costs of £20/head for diesel, machinery running costs, hire purchase, insurance etc are included and come to £120/head. All grazing costs, plus fixed costs, come to £231.
Last year, assuming fertiliser cost £240/t, concentrate was £230/t and fixed costs of £15 month, grazing costs were £155.
As weather conditions and grass growth are highly variable in autumn, heifers are housed on 1 October weighing 570kg and intensively finished over 50 days.
Weight gain is maintained at 1kg/day, bringing heifers to a final liveweight of 620kg. At 55% kill-out, carcase weight averages 341kg.
During this time, heifers are fed 25kg/day of high quality silage costing £30/t to produce on farm. Concentrate is fed at 4kg/day (£330/t).
Combined feed costs come to £104/head, an increase of £33 on the previous year. Fixed costs come to £33/head, bringing total costs to £137/head during the intensive finishing period.
Adding purchase cost to that for grazing and intensive finishing, the animal has a break-even cost of £1,408, or 413p/kg on a 341kg carcase. A £50/head profit margin increases this to 428p/kg.
Last year, a heifer purchased at the same price and finished on similar inputs would have had a break even cost in the region of 380p/kg before any margin is factored in.
Profit challenge ahead for
The increase in farm input costs such as fertiliser, concentrate and fuel, means that farmers are relying on higher market returns to cover escalating production costs.
On page 52 of last week’s issue of the Irish Farmers Journal, we presented analysis on how the rise in such input prices will impact the cost of keeping a suckler cow for the year ahead.
The analysis was calculated on a 60 cow herd selling weanlings in autumn with a small carryover of lighter animals sold as yearlings.
The example assumed the farmer would purchase the same volume of inputs in 2022 as they did in 2021.
Fixed costs were factored in to the example, but all farm payments are excluded as they are not directly tied to suckler production.
Based on the example farm, the cost of keeping the suckler cow rose from £865 in 2021 to £1,099 in 2022, a 27% or £234 increase year on year.
At the outlined figure for the year ahead, the financial outlay for running a 60 cow herd comes to £65,940 in 2022.
If the farmer normally culls eight cows, which are then sold live in good body condition averaging 700kg at 185p/kg, deducting this sales income reduces the annual operating costs to £55,540.
This expense has to be covered by the sale of weanlings. Assuming 95% of cows that calve produce a weanling for sale, 57 calves are sold annually.
Split evenly across all 57 calves, it means the farmer needs each calf to average £974 for the herd to break-even.
At an average sale weight of 350kg, this equates to 278p/kg and is a price that has been regularly paid for top quality weanlings in recent years.
However, it cannot be understated that this is the average sale price for the herd, not the top quartile or first draft of animals sold.
Achieving this average will be a challenge for even the most efficient of farmers with a herd of high quality continental weanlings.
There is no profit margin factored into the example costings. Calves need to average above £974 per head for there to be a positive contribution to net farm income.
In contrast, the annual running costs for the same herd in 2021 would have been £51,900. Selling eight cows weighing 700kg at 170p/kg would reduce this to £42,380.
Again, assuming 57 calves weaned and sold, each animal had to average £743, or 212p/kg on a 350kg weanling.