A dairy farmer from Wexford who keeps all his stock to finish rang on Friday to query what the impact of the new Glanbia-Kepak Twenty20 Club deal would be on his beef-finishing business.
This year, he was considering selling all of his dairy beef calves at four- to six-weeks-old to allow him to focus more on his dairy replacements.
He is buying most of his inputs from Glanbia already. However, he buys some feed and fertiliser from other local merchants. The farm is quality-assured by Bord Bia.
Let’s just run through the core output from this fairly typical spring-calving dairy farm (February- to April-calving) in the southeast.
Good performance
The farm is milking 100 cows so with good performance, etc, 90 calves will be produced for sale or keep by year two.
Half of the milking herd is dairy-bred for replacements and the other half is bred to Hereford AI for dairy beef-bred cattle.
Typically, there will be 25 dairy heifer calves (February-born), 20 Friesian bullocks (February-born), 20 Hereford heifers (March-born) and 25 Hereford steers (March-born).
Based on what we know and using industry averages, we are assuming the following:
The Hereford heifers will hang up at 270kg average carcase weight at 20 months of age grading O=, and fat score 3. The Hereford steers will hang up at 310kg on average carcase weight at 22 to 23 months of age grading O=, and fat score 3. The Friesian steers will weigh 310kg, grade O minus and fat score 3 at 24 months of age on average. So, what happens if we put this output through the Glanbia-Kepak club? In terms of finish date, we are assuming the Hereford heifers will be slaughtered in November, the Hereford steers in January, half of the Friesian steers in March and the other half in April.
We will look at two scenarios where the average quoted price is €3.75/kg and €4/kg.
Results
At a base of €3.75/kg, the net price per kilo for the Hereford heifers is €3.79/kg and they will come into €1,020/head with all additional bonuses, etc. If the base price moves up to €4 base, the net return is €1,090/head. At €3.75/kg base, the Hereford steers will net €4.04/kg and they will come into €1,252/head. If the price moved to €4/kg base, the net return would be €1,299/head. At €3.75, the Friesian steers will net €3.91/kg and in total make €1,212/head. At €4/kg base, the output price moves to €1,283/head. Homebred stock
Now, the best cost estimates for the cost of production show the Hereford heifers will cost €870/head assuming a €200/head margin-labour input. They leave €156/head at 3.75/kg or €220/head if base price is €4/kg. Using the same assumption, the Hereford steers will cost €1,121/head so they will leave a net margin of €123/head or €170/head if the price moves up to €4 base. The Friesian steers will cost €1,177 per head to rear, so net margin will be €35. If the base price moves to €4/kg, the net margin moves to €81 per head. So, in terms of profit, if in the club at €3.75/kg, the summary is:
20 Hereford heifers @ €156 each = €3,120.25 Hereford steers @ €123 each = €3,075.20 Friesian bullocks @ €35 each = €700.In total, CLUB at €3.75 = €6,895.If there was NO CLUB, it’s €2,445 (a drop of €4,450 or €68/head finished).So in terms of profit if in CLUB at €4/kg summary is:
20 Hereford heifers @ €220 each = €4,400.25 Hereford steers @ €123 each = €4,250.20 Friesian bullocks @ -€12 each = €1,620.In total, CLUB at €4 = €10,270.If there was NO CLUB it’s €7,235 (a €3,035 difference or €46/head finished).Both of these tables assume no opportunity value on the calves at three- to four-weeks-old. If we look at the weekly data of calf prices printed in the Irish Farmers Journal on what calves are making last week, we see Hereford heifers making €154 each at four-weeks-old, Hereford bull calves making €195 each and Friesian bull calves making €70 each.
20 Hereford heifer calves @ €154 = €3,080.25 Hereford bull calves @ €195= €4,875.20 Friesian bull calves @ €70 = €1,400.So, if the calves were sold at three- to four-weeks-old, the total income is €9,355.
For dairy farmers using current breeding genetics, assuming average costs of production the Glanbia-Kepak deal isn’t a game-changer.
Yes, it’s making a difference and improving the output value at both the €3.75/kg base price and the €4/kg base price for more average-quality stock.
However, the sale option is still the better option for the dairy farmer.
Finishing stock
Should the farmer decide not to sell the calves and finish the stock then the bottom line is potentially the Glanbia-Kepak deal will give you an additional €68/head at base of €3.75/kg and €46/head at a base of €4/kg.
However, it is important to say the benefit of membership in this type of club would improve if the quality of stock improved so that they graded better on the grid, and also that the stock get the in-spec bonus.
The grid goes against the poorer-quality O-grading stock. The club seasonality payment typically is not helping spring-born stock.
The benefit of membership in this type of club would improve if the quality of stock improved so that they graded better on the grid
The Herefords get the club-breed bonus. The Friesians don’t get the club-breed bonus but they benefit from the blanket application of the club premium and the club protocol bonuses.
I’ve allocated half of the out-of-season bonus as some of the Friesians will be slower to finish and could move into April before being slaughtered.
Downsides
The potential downside is that you, as a business, are tied into buying all inputs from one supplier and this could bring the risk of higher costs into the cost structure, assuming no additional costs to becoming a club member.
The business is also tied into a factory price based on the average of the quoted base prices as published, which again limits the negotiating or upside at sale time.
However, on the other hand, it guarantees a market base price.
Read more
Listen: how do you take part in the Glanbia-Kepak calf to beef scheme?
Glanbia and Kepak want 6,000 calves in year one of Twenty20 calf-to-beef scheme
Glanbia/Kepak Twenty20 Beef Club: your questions answered
A dairy farmer from Wexford who keeps all his stock to finish rang on Friday to query what the impact of the new Glanbia-Kepak Twenty20 Club deal would be on his beef-finishing business.
This year, he was considering selling all of his dairy beef calves at four- to six-weeks-old to allow him to focus more on his dairy replacements.
He is buying most of his inputs from Glanbia already. However, he buys some feed and fertiliser from other local merchants. The farm is quality-assured by Bord Bia.
Let’s just run through the core output from this fairly typical spring-calving dairy farm (February- to April-calving) in the southeast.
Good performance
The farm is milking 100 cows so with good performance, etc, 90 calves will be produced for sale or keep by year two.
Half of the milking herd is dairy-bred for replacements and the other half is bred to Hereford AI for dairy beef-bred cattle.
Typically, there will be 25 dairy heifer calves (February-born), 20 Friesian bullocks (February-born), 20 Hereford heifers (March-born) and 25 Hereford steers (March-born).
Based on what we know and using industry averages, we are assuming the following:
The Hereford heifers will hang up at 270kg average carcase weight at 20 months of age grading O=, and fat score 3. The Hereford steers will hang up at 310kg on average carcase weight at 22 to 23 months of age grading O=, and fat score 3. The Friesian steers will weigh 310kg, grade O minus and fat score 3 at 24 months of age on average. So, what happens if we put this output through the Glanbia-Kepak club? In terms of finish date, we are assuming the Hereford heifers will be slaughtered in November, the Hereford steers in January, half of the Friesian steers in March and the other half in April.
We will look at two scenarios where the average quoted price is €3.75/kg and €4/kg.
Results
At a base of €3.75/kg, the net price per kilo for the Hereford heifers is €3.79/kg and they will come into €1,020/head with all additional bonuses, etc. If the base price moves up to €4 base, the net return is €1,090/head. At €3.75/kg base, the Hereford steers will net €4.04/kg and they will come into €1,252/head. If the price moved to €4/kg base, the net return would be €1,299/head. At €3.75, the Friesian steers will net €3.91/kg and in total make €1,212/head. At €4/kg base, the output price moves to €1,283/head. Homebred stock
Now, the best cost estimates for the cost of production show the Hereford heifers will cost €870/head assuming a €200/head margin-labour input. They leave €156/head at 3.75/kg or €220/head if base price is €4/kg. Using the same assumption, the Hereford steers will cost €1,121/head so they will leave a net margin of €123/head or €170/head if the price moves up to €4 base. The Friesian steers will cost €1,177 per head to rear, so net margin will be €35. If the base price moves to €4/kg, the net margin moves to €81 per head. So, in terms of profit, if in the club at €3.75/kg, the summary is:
20 Hereford heifers @ €156 each = €3,120.25 Hereford steers @ €123 each = €3,075.20 Friesian bullocks @ €35 each = €700.In total, CLUB at €3.75 = €6,895.If there was NO CLUB, it’s €2,445 (a drop of €4,450 or €68/head finished).So in terms of profit if in CLUB at €4/kg summary is:
20 Hereford heifers @ €220 each = €4,400.25 Hereford steers @ €123 each = €4,250.20 Friesian bullocks @ -€12 each = €1,620.In total, CLUB at €4 = €10,270.If there was NO CLUB it’s €7,235 (a €3,035 difference or €46/head finished).Both of these tables assume no opportunity value on the calves at three- to four-weeks-old. If we look at the weekly data of calf prices printed in the Irish Farmers Journal on what calves are making last week, we see Hereford heifers making €154 each at four-weeks-old, Hereford bull calves making €195 each and Friesian bull calves making €70 each.
20 Hereford heifer calves @ €154 = €3,080.25 Hereford bull calves @ €195= €4,875.20 Friesian bull calves @ €70 = €1,400.So, if the calves were sold at three- to four-weeks-old, the total income is €9,355.
For dairy farmers using current breeding genetics, assuming average costs of production the Glanbia-Kepak deal isn’t a game-changer.
Yes, it’s making a difference and improving the output value at both the €3.75/kg base price and the €4/kg base price for more average-quality stock.
However, the sale option is still the better option for the dairy farmer.
Finishing stock
Should the farmer decide not to sell the calves and finish the stock then the bottom line is potentially the Glanbia-Kepak deal will give you an additional €68/head at base of €3.75/kg and €46/head at a base of €4/kg.
However, it is important to say the benefit of membership in this type of club would improve if the quality of stock improved so that they graded better on the grid, and also that the stock get the in-spec bonus.
The grid goes against the poorer-quality O-grading stock. The club seasonality payment typically is not helping spring-born stock.
The benefit of membership in this type of club would improve if the quality of stock improved so that they graded better on the grid
The Herefords get the club-breed bonus. The Friesians don’t get the club-breed bonus but they benefit from the blanket application of the club premium and the club protocol bonuses.
I’ve allocated half of the out-of-season bonus as some of the Friesians will be slower to finish and could move into April before being slaughtered.
Downsides
The potential downside is that you, as a business, are tied into buying all inputs from one supplier and this could bring the risk of higher costs into the cost structure, assuming no additional costs to becoming a club member.
The business is also tied into a factory price based on the average of the quoted base prices as published, which again limits the negotiating or upside at sale time.
However, on the other hand, it guarantees a market base price.
Read more
Listen: how do you take part in the Glanbia-Kepak calf to beef scheme?
Glanbia and Kepak want 6,000 calves in year one of Twenty20 calf-to-beef scheme
Glanbia/Kepak Twenty20 Beef Club: your questions answered
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