With beef finishing rations currently costing £245 to £250/t, can farmers with forward store cattle make a positive margin by taking such animals through to slaughter by mid-June?
Beef prices are currently holding firm around the 380p/kg mark for in-spec steers and heifers. But is this price adequate to cover the associated feed costs during the intensive finishing phase?
Mid-March is the time to make a final call on which store animals will be finished out of the shed and which animals will be sold through the live ring or go back to grass.
As of this weekend (14 March), there is just shy of 80 days until the start of June. Given this time frame, forward stores should be no more than 100kg from reaching a suitable finishing weight.
If the decision is made to kill forward stores out of the shed, these animals should be moved on to an intensive finishing diet immediately.
When deciding whether to finish cattle out of the shed, the starting point is a simple budget.
Include what volume of purchased feed and forage will be required, the cost of such inputs, target carcase weight and a final break-even price.
This should be accompanied by weighing cattle to get an accurate handle on what animals will realistically reach a suitable finishing weight.
By weighing cattle, it is possible to put an accurate sale value on animals if they were sold now, rather than taken through to slaughter.
At the end of the budget, the break-even price should give a solid indication of whether a margin can be made from intensive finishing or whether animals would be better off sold now or put back to grass.
However, there are other key factors that have to be considered when completing a break-even budget.
Firstly, the herd must not be under movement restrictions if selling live is to be an alternative outlet. Secondly, has the farm adequate grazing ground available to put forward stores back to grass before killing later in the year?
As an example of a simple finishing budget, take a farmer with 20 continental-cross steers currently averaging 600kg liveweight. Animals are homebred and typically achieve R+ and U- conformation.
Using a conservative live sale price of 210p/kg to reflect the mix of R and U grading cattle, in a stored condition, at 600kg, the steers are worth £1,260 if cashed in now.
Assuming the farmer wishes to finish the animals in 100 days from 14 March, the steers will be ready for slaughter around 22 June.
During the finishing phase, steers consume an average 8kg/day of concentrate, starting at 6kg/day and finishing on 10kg/day during the final few weeks. At a ration price of £245/t, concentrate costs come to £196/head.
Factoring in 20kg/day of silage at £20/t over 100 days, steers will consume 2t/head costing £40. Allowing £20 to cover miscellaneous costs and £50/head for fixed costs, finishing costs come to £306/head.
Adding on the animal’s hypothetical sale value at the start of the finishing period, break-even cost is £1,566/head. Assuming an average daily gain of 1kg/day and a kill-out of 57%, steers should average 399kg carcase weight. This converts to a beef price of £3.92/kg.
Note there is no profit margin included or labour charge factored in to the example. A £50/head margin adds 12p/kg to break-even price outlined. Kill charges are omitted, as similar fees would be incurred through mart commissions.
The example also assumes there is no change to the ration price. But if concentrate costs rose by £10/t, this would add another 2p/kg to break-even price.
Reducing concentrate feeding to an average 6kg/day would reduce the break-even price by 12p/kg, but remember this could reduce liveweight gain and consequently reduce carcase weight.
In the case of a farmer with spring-born bulls currently weighing 500kg, the basic inputs have been recalculated to determine finishing inputs.
Again, the assumption is that bulls are continental-cross with R+ to U= conformation. As there are limited buyers in the live ring for such animals, the starting value is corrected back to 190p/kg, making a 500kg bull currently worth £950.
A final liveweight of 680kg will yield a 387kg carcase at 57% kill-out, which will take 120 days to achieve at an average daily gain of 1.5kg/day.
Assuming bulls average 10kg/day of concentrate (£245/t) and 5kg/day of straw (£150/t), feed costs over 120 days come to £384.
Adding in miscellaneous costs of £20 and fixed costs of £60, break-even cost is £1,414. This converts to a beef price of 365p/kg, excluding any profit margin and labour costs. A £50 margin is worth 12p/kg at the outlined carcase weight.
Given the rise in concentrate costs, farmers should carefully consider the economics of finishing animals out of the shed. There is little point feeding cattle for another 80 to 100 days for no additional return.
In the case of well-bred continental types with U grade conformation, the live ring is providing a good alternative outlet for these animals at present, especially for farmers with limited negotiating power when selling stock.
However, for animals with lower conformation, there is very little difference between prices paid in factories and marts. Beef price may well rise in late spring, with finished cattle numbers expected to be tight, and as lockdown measures relax and more food service outlets reopen. These businesses will require fresh stocks of beef, which could potentially give the cattle trade a short-term price boost.