Once the leaves start to fall and big store cattle sales get going, so too does the speculation around beef price, meal price and what the economics will be like for the impending winter.
Over the last number of years, winter finishing budgets haven’t made good reading. The distinct lack of a premium for winter finishing has meant more and more smaller operators have exited the business.
It has moved to a specialist operation, with large farmer-owned feedlots and factory-owned feedlots now dominating the winter finishing business.
These larger operations have the strength and power to negotiate with processors and many will sit down with them over the next month to agree a minimum price for finished animals for the next six months.
There are still a number of smaller farmer-based operators, but, unfortunately, these farmers pay dearly for contracts issued to larger operators.
At current beef prices and with a lack of any meaningful level of price contracts, winter finishing is in a very precarious position.
Factories’ unwillingness to sit down and engage with winter finishers will see more walk away from the system.
This will lead to an increase in seasonality, which isn’t good for the industry and, more importantly, won’t be good for farmers.
A seasonal production system would see more animals being shifted to an autumn finish off grass, which would lead to an increased supply during August, September and October.
An increased supply would give processors the chance to push down prices. With a higher proportion of the national kill now coming from the dairy herd, this could be a real possibility and will present huge challenges for the industry to navigate.
Unfortunately, farmers are their own worst enemy when it comes to winter finishing.
Factories will continue to buy cattle as cheap as they can and the fact that farmers continue to winter finish means nothing will change.
Every year, budgets are completed to ascertain the beef price required to deliver a small margin on top of the huge investment that takes place.
The reality is that year after year, farmers use their single farm payment and other supports to subsidise the winter finishing business with one winner in the end – the processor.
For a case study, we used a farm model that is technically efficient. To make a margin out of winter finishing, animal performance has to be very high and the farmer has to have a good handle on costs.
Daily liveweight gains have been set at 1.1kg/day. It could be argued that this is too low. However, it’s better to under-predict on performance to allow some leeway for a margin.
Silage quality is good at 22% dry matter and 72 DMD. Ration costs are €290/t. This is a conservative figure and will vary from farm to farm, depending on feeding system.
Finishing ration prices are running €30/t to €40/t ahead of last year.
There are those who will argue that store price is too high, but ask the person who is selling this store – and they’ll say they need it all.
Cheaper stores isn’t the answer to the winter finishing problem, but purchasers should still have a budget and stick to it.
That said, if we look back at last year’s store prices, you would have to question some of the high prices being given for store cattle, which is out of sync with current beef prices.
While beef price has increased this year, the store has actually improved more, with some of this being driven by Northern Irish farmers and feedlots who have been working with a higher beef price for much of 2021.
Silage has been included at €25/t. Vet costs, which include dosing, are coming in at €15/head, while haulage, slaughtering costs and commission are coming in at €55.
An interest charge of €65/head is included to allow for some of the money being borrowed to fund the enterprise.
No figure for fixed costs has been included. At a rate of €50/head this would add a further 12 cent/kg to the required breakeven price.