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Store cattle numbers being offered for sale in livestock marts are increasing week on week.
With the live trade currently buoyant in terms of the prices being paid for prime livestock, farmers should carefully consider their options before purchasing cattle this autumn.
Buying cattle to finish next spring is a gamble as the farmer has no indication of what beef prices are likely to be when animals are ready to kill. This year in particular, there is extra uncertainty caused by Brexit, which could affect markets (either negatively or positively) as the UK exit date approaches.
Cattle rations have also increased in price when compared with last winter. Higher meal prices will quickly erode any chance of making a profit on cattle if they are not performing adequately on their finishing diet.
Therefore, before going out to buy cattle, farmers should be doing a few simple budgets to determine which type of animal will give the best return over the upcoming winter period.
This may mean a change from traditional buying practices if the economics of winter finishing are not in your favour.
For instance, take a farmer who normally buys U grading store cattle. As these cattle usually realise prices at the top end of the live market, there is a very small margin between the purchase and sale price to cover finishing costs.
Plainer animals
So, for some farmers, there may be better value in buying slightly plainer animals, especially if there is a significant saving to be had on purchase price.
Alternatively, demand for heavier cattle suited to a short intensive finishing period is extremely competitive among large specialist finishers at present.
Therefore, it may be more cost-effective for some farmers with plenty of fodder in store to purchase lighter cattle that can be wintered and finished next spring, or returned to grass and slaughtered next summer.
When it comes to winter finishing, there is no system that is profitable for every farm, which is why it is important for farmers to complete a budget which is relevant to their own farm. Outlined are two examples of a simple feed budget to be used before buying cattle this winter.
The purchase of heavy cattle that can be finished after 60 to 90 days of intensive feeding means that cattle bought during October will be slaughtered in December and January.
With such a short finishing period it allows a farmer to re-stock sheds with similar cattle to kill in late spring.
As there is usually a small margin in winter finishing, this option increases the throughput of cattle, thereby generating more income.
With cattle finished over a shorter time period, it is easier to make an informed estimate on what beef price is likely to be when cattle are ready to kill.
As with any budget, always use a beef price that is relevant to your cattle and is realistic of what the market can pay.
If your cattle are typically R grading animals, then there is little point in using a price which is more typical of U grading animals.
Short-keep cattle need to be purchased within 50kg to 100kg of their finished liveweight. With these animals, the focus should be on getting sufficient fat cover on the carcase.
Therefore, cattle should be fed a high-energy ration of 12.5 to 13 MJ ME. Protein levels can be reduced to 12% to 14% to encourage cattle to put on fat, rather than lean muscle.
At current feed prices, rations should contain 40% to 50% maize meal. Maize increases both energy and starch levels, which also help to deposit fat cover, and is currently better value than cereals.
Example
For a group of steers averaging 620kg and purchased for 200p/kg, the animals will cost £1,240 per head.
Assuming cattle are finished over 90 days with an average daily gain of 0.9kg/day, the animals will have a final liveweight of 700kg, which at 56% kill-out gives a carcase weight of 392kg.
Feeding an average of 8kg/day of a finishing ration, costing £225/t, plus 20kg/day of silage costing £20/t, it takes £198 per head to cover feed over the 90-day period.
Adding these feed costs to purchase price means the animal has a breakeven price of £1,438, which converts to a beef price of 357p/kg at the outlined carcase weight. It is a price generally reflective of current markets.
But no allowance for veterinary, labour and fixed costs have been included in the example, so it again highlights that the margins per head in winter finishing are small, unless there is a lift in beef price, or the finisher is able to negotiate a price well ahead of the base on offer.
For some farmers, this option might be more cost effective. Cattle can be purchased at a lower price and stored for a short period before moving on to an intensive finishing diet.
Key to making this option work is getting a reasonably good level of weight gain during the store period, at reasonably low cost.
Cattle should be gaining 0.5kg to 0.7kg/day during a 100- to 120-day store period, increasing to 1kg/day or better during the final finishing period.
Cost comparison
Purchasing a group of 520kg steers costing 200p/kg means the animals will average £1,000 per head.
Assuming cattle are fed 30kg/day of silage (£20/t) and 3kg/day of a growing ration (£220/t) over a 100-day store period from mid-October to early February, feed costs come to £126 per head.
With the steers moving into a finishing phase for another 100 days, that means the animal is slaughtered in mid-May.
Feeding cattle an average of 7kg/day of concentrate (£225/t) over the finishing period, and 20kg/day of silage, total winter feeding costs amount to £346 per head.
Assuming a daily gain of 0.6kg/day during the store period and 1kg/day during the finishing period, the animal has a final liveweight of 680kg, which converts to a 388kg carcase at 57% kill-out.
Adding in purchase price, these cattle have a break-even cost of £1,346 which converts to a beef price of 347p/kg.
While the breakeven price is lower than that in option one, be mindful that these cattle are on farm for an additional four months before they are ready to kill.
Winter finishing risks
Experienced finishers can buy cattle that are capable of achieving high levels of weight gain and are not over-priced when purchased.
This gives them a better chance of making a positive margin on these animals when they are sold.
When buying cattle, it is important to try to source animals which are similar in size, weight and type, as they are much easier to manage during the finishing phase.
Having cattle at a similar weight means they can be finished in larger batches, allowing farmers to negotiate for an improved price when selling animals.
Buying lighter cattle can reduce purchase price further. However, these animals will struggle to kill out of the shed at an adequate carcase weight that can generate sufficient income to cover all associated costs.
Timing when cattle are likely to finish is also an important factor. Target having cattle ready for sale during periods of strong factory demand for beef, such as early December or late spring.
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