As with all cattle being offered for sale through the live ring, the drop calf trade is exceptionally strong at present.
While a positive live trade is always welcome, the farmers buying these animals need to think about whether they can recoup the purchase price, along with inputs, and still have a margin when they come to sell animals.
Good-quality beef-bred calves are currently making anywhere from £350 to £700 depending on the breed and age of the calf.
Given the prices being paid at the upper end of the market, the economics of purchasing such animals to take through to slaughter are questionable.
The rise in demand for beef-bred calves has also filtered through to Friesian- and Holstein-sired calves, which are making anywhere from £100 to £200 for stronger, weaned animals.
In recent years, there has been a trend whereby suckler farmers have reduced cow numbers and replaced these animals with dairy-bred calves. Under a well-managed system, a good calf-rearing enterprise can increase farm output and income, but it is heavily dependent on buying calves at a price which is in line with beef price.
As calves in their first grazing season require a relatively small area of ground, they can utilise grass on heavier paddocks less suited to carrying suckler cows or yearling stores.
Given the year-round calving profile of the NI dairy sector, there is a relatively constant supply of calves for sale throughput the year, helping to satisfy buying demand.
Also, with advances in planned breeding programmes and the use of sexed semen, more dairy farmers are now using a greater percentage of AI beef sires on cows less suited to producing replacements.
By using higher genetic merit AI sires, this is helping to improve calf quality and lifetime performance in animals destined for beef production.
However, there are downsides to running a calf-to-beef system. For instance, dairy-bred calves will have lower carcase weights and lower conformation.
This reduces the potential carcase value and will be a big factor for the profitability of calves being purchased at current prices.
During a period when the beef market is oversupplied with cattle, dairy-bred cattle can be a harder sell compared to continental cross animals meeting market specifications for the UK retail sector.
Having dairy-bred calves committed under a contract arrangement will help get around this issue, as well as providing a guaranteed sale price which helps with budgeting purposes.
Younger calves purchased at two to four weeks old can experience higher levels of mortality, especially if calves did not get adequate colostrum in the first 24 hours of life.
When purchasing calves on a weekly, or fortnightly basis, there will be a constant disease challenge for the animals already on farm, meaning issues such as scour and pneumonia are more common.
Depending on the availability of housing and grazing, dairy-bred calves will suit both steer and bull finishing systems.
But at the current prices being paid for calves, can farmers make a margin on such animals?
Taking the example of a well-run system, hypothetical costs are outlined for calves purchased and finished as young bulls.
For the purpose of the example, it is assumed that calves are early December-born animals and weaned off milk with an average cost of £500/head in mid-March.
In a well-run system, the target should be to finish bulls by 16 months of age, meaning calves will be on farm for a 12-month period.
On arrival to the farm, calves get silage and 2kg/day of concentrates (£250/t), plus respiratory vaccines (£15/head). Purchase weight is 140kg liveweight.
Calves are grazed from April to the end of August, getting 1kg/day of concentrate over this period and gaining 1kg/day, bringing liveweight to 293kg by housing time.
Grazing ground gets three bags of CAN (£250/t) over the season. Grazing four calves per acre, fertiliser costs £10/head. Two worm drenches, plus a fluke and lice treatment after housing, at a cost of £10/head and £25/head miscellaneous costs, are factored in.
Bulls are then housed for intensive finishing over 212 days from 1 September until slaughter on 1 April. Calves are built up to ad-lib levels and offered high-quality silage along with straw during the finishing period.
Total concentrate input during the finishing period is 1.7t/head, assuming bulls start on 4kg/day and finish on 12kg/day in the final weeks prior to slaughter.
Along with the concentrate fed at grass and on arrival to the farm, total concentrate input is 1.9t/head.
Silage intake at an average 15kg/day over the housing period is 3.1t (£20/t), plus 1kg/day straw (£180/t), brings forage costs to £100/head. Miscellaneous costs of £25/head are again factored in.
Weight gain for the bulls during the finishing period is taken as 1.4kg/day, bringing animals to a final liveweight of 590kg. At 56% kill out, carcase weight will be in the region of 330kg.
Taking the purchase price of £500 and adding total inputs, the breakeven price comes to £1,160/head as outlined in Table 1. On a 330kg carcase, this equates to a beef price of 352p/kg. However, there are no fixed costs or margin included in the example. Monthly fixed costs at £10/head come to £120, adding 36p/kg to breakeven price. A modest £50/head margin adds another 15p/kg to beef price.
Reducing calf price to £400/head lowers breakeven beef price by 30p/kg on a 330kg carcase.
Increasing weight gain to 1.5kg/day during the finishing period brings the final liveweight to 610kg, raising carcase weight to 341kg. This reduces the original breakeven price from 352p/kg to 340p/kg, before factoring in fixed costs and profit margin.