Price gap of €430 between top- and bottom-quality stores

Analysis of Irish Farmers Journal MartWatch data received over the course of the year from marts throughout the country shows that the gap between the top and bottom third of bullocks has widened to €430/head for a 550kg bullock, while it stands at €423/head for 400kg to 500kg types.

While the gap between the top and bottom third has been widening in recent years, the difference has jumped by over €40/head over the course of 2018.

Further analysis of the figures shows that while the gap between top- and bottom-quality heifers has widened, the price difference is from €350/head for 500kg to 600kg heifers to €342/head for 400kg to 500kg heifers.

The price paid for the top third of store bullocks from 400kg to 500kg was €2.55/kg in 2018, almost the same as in 2017. The average price paid for the bottom third of bullocks in the same weight range was €1.61/kg, some 6c/kg less than in 2017. This leaves the price gap between the top and bottom third of store bullocks at a staggering 94c/kg or €423/head.

The average-quality 500kg to 600kg steer sold for €2.10/kg over the course of 2018, just 1c/kg less than in 2017. If we look at Table 3, the top third of bullocks in the same weight range sold for €2.44/kg or €1,342/head, while the bottom third sold for €1.66/kg or €913, a gap of 78c/kg.

The cause of the widening price gap is two-fold. The price paid for the top third of bullocks in that weight range increased by 2c/kg, or €11/head, while the bottom third of bullocks in terms of quality sold for 5c/kg less than in 2017, causing the gap between the top and bottom third of cattle to have increased by 7c/kg or €39/head from 2017 to 2018.

In the case of heifers, the price gap over the course of the year isn’t as vast. For heifers from 400kg to 500kg, the top third sold for €2.49/kg or €1,120 on average in 2018, just 1c/kg less than in 2017.

However, if we look at the bottom third, they have followed a similar trend to bullocks, having decreased by 8c/kg to €1.73/kg or €778/head on average over the course of 2018, a decrease of €36/head on 2017. This leaves the price gap at 76c/kg between the top and bottom third of store heifers or €342/head.

The decrease seen in the case of heavier heifers was not as large in 2018 compared with lighter store types. The average 500kg to 600kg heifer sold for €2.15/kg over 2018, the same as the two years previous.

The top third sold for €2.43/kg or €1,336 for a 550kg heifer, an increase of 1c/kg on the average price paid over 2017. The bottom third in terms of quality sold for €1.79/kg or €984 for a 550kg heifer, a decrease of 3c/kg on 2017 levels, leaving the price gap at 64c/kg or €352/head.

The main reasons for the price gap between the top and bottom third of cattle widening are quite simple. With a more challenging beef trade in 2018 versus 2017 and much higher cattle kills, particularly in the second half of the year, farmers have been more focused on the quality of cattle they are sourcing in marts.

Despite more Angus and Hereford calves now being exported than what would traditionally have been, the increased diary-beef births, combined with a reduction in suckler cow births at the same time, is reducing the overall quality of cattle on offer in the country.

In addition, in the past few years, with increasing Angus and Hereford availability and with attractive price premiums, farmers and finishers switched to finishing more dairy-cross animals, as they were cheaper to purchase and the premiums were attractive.

However, this year saw a switch away from these types of stock at the prices that would have traditionally been paid.

Many finishers are blaming poor kill-outs and lower carcase gain in the finishing phase, combined with the fact that somewhere between one third and a quarter of these cattle did not achieve a grade sufficient enough to attract all the premiums as reasons for the slight move away from them.

In addition, we see it time and time again that in years where cattle prices are under pressure or that factory trade is a little more difficult, there is a greater focus on the quality of cattle being purchased in marts by farmers and agents as they look to achieve the highest grades possible when finishing to maximise carcase value.

Figure 2 details the average price paid for a 550kg steer in 2016, 2017 and 2018. Although the graph follows a similar pattern in the first half of the year, the second half for any farmers who sold stock was not nearly as positive, in fact it was a very challenging autumn, and one that is not well represented by the average prices shown over the course of the year.

The fodder crisis undoubtedly disturbed the flow of cattle and prices during the summer period.

If we look at the graph, we can distinctly see that in summer, from mid-June to mid-July, average prices were at their lowest, with bullocks from 500kg to 600kg selling at €1.94/kg to €1.96/kg or from €1,067 to €1,078 per head for the average 550kg steer.

The low prices in mid-summer were created by supply and demand issues. There was an over-supply of plainer-quality animals at the same time as there was reduced demand as a direct result of low grass growth and a worsening fodder situation.

The average price paid peaked in early autumn, coinciding with the commencement of ANC payments rolling out to farmers.

The second price peak was in mid-October, again coinciding with the roll-out of BPS payments to farmers.

From then to the end of the year, we can see that average prices dropped back to around €1.90/kg to €1.95/kg in November and December, leaving average prices back by 8c to 10c/kg or €44 to €55/head behind the same week in 2017.

Table 1 also details the average price paid for a 500kg to 600kg steer and 400kg to 500kg steers and heifers compared with the average price paid in 2017.

If we look at forward store bullocks over 500kg, these were probably, along with heavy heifers, the most resilient in terms of price drops when compared with all other categories in 2018.

The average 550kg bullock sold for €2.10/kg, just 1c/kg less than the average price paid in 2017. This equates to a reduction of just €5.50/head on the 2017 figure.

However, if we look at the price paid for the average 450kg steer, it was 3c/kg less in 2018 compared with 2017; this equates to a drop of almost €10/head.

Light heifers were met with the largest price correction. The average 450kg heifer sold for 5c/kg less than the average price paid in 2017, a reduction of close to €20/head.