Winter beef finishers face massive losses, warns Teagasc

And ICSA claims beef trade economics are ‘totally out of kilter’ for family farms

WINTER beef finishers are facing huge losses next spring as factory prices continue to lag behind the mart trade, Teagasc has warned.

With forward stores making €2.202.50/kg at the marts, the current factory price is way off what will be needed to break even, let alone make a margin, according to the latest Teagasc projections.

Its beef budgets outline a number of finishing scenarios, from the shorter winter finishing and bull systems to the longer autumn-to-autumn and weanling to beef systems.

“On the face of it, the number of unknowns within the sector outweigh the knowns,” Teagasc beef specialist Aidan Murray told the Farming Independent.

“Across all the categories prices are up 12pc when compared to last year, but this ranges from 2pc to 30pc. This is a welcome development for weanling and store producers, but will tighten potential margins on the finishing side.

“If we take the purchase of a 550kg store bullock at €2.33/kg liveweight, the animal will cost €1,281. If, when slaughtered, it gives a 380kg U=3 carcase at a base of €3.60, that animal will gross €1,512 leaving only €231 to cover the costs of putting on 150kg liveweight and leaving a margin.

“If the same animal was to grade an R=3 then the gross value drops to €1,444, leaving only €163 to work with.”

Profit

ICSA beef chairman Edmund Graham said winter finishing as a business is “finished for the typical family-run commercial beef unit”.

“The economics are totally out of kilter and factories cannot expect farmers to deliver cattle in spring time when the break-even price is €4.48/kg.

“ICSA does not accept that farmers should even talk about break-even price — we need to make profit,” said Mr Graham.

“Winter finishing is a capital intensive business and it takes massive investment along with a heavy demand on labour and machinery. Most winter finishers do not account for the opportunity cost of land, but with land leasing out from anywhere between €150-300/ac this is just self-delusion,” continued Mr Graham.

He said the added risk factor posed by Brexit and Covid-19 means meat factories can’t say what the price will be next week.

“It is time for farmers to pull the plug on this madness.”

Budgets

The Teagasc beef budgets (see below) have silage costs at €30/t and meal at €240/t.

The analysis details continental steers starting at 530kg, costing €2.33/kg at purchase, and leaving a carcase weight of 375kg.

The projected break-even price of €4.48/kg on this animal is almost 70c/kg higher than current prices.

For a 500kg Friesian and a traditional type steer that have been purchased in at €1.76/ kg and €2.05/kg respectively and finished on a diet of good silage and 4kg concentrates, the break-even price next spring is €4.04/kg and €4.41/ kg. Teagasc analyst Aidan Murray said the autumn-toautumn finishing system appears to be the most attainable for achieving a margin.

“This is a purely grass/ silage-based system with minimal to no concentrates, so good quality silage and good grazing performance will be essential to achieving the target slaughter weight of 700kg in the autumn of 2021.

“A 430kg steer is bought costing €2.22/kg liveweight. The final carcase weight of 375kg has to cover total costs of €1,425 meaning that the break-even price needs to be €3.80/kg,” he said.

“To be frank other than the autumn-to-autumn system, the current beef price looks a long way off what will be needed next spring for finishers to break even, let alone make a margin.

“Given the uncertainties around Covid and the implications of Brexit when it comes to possible future tariffs, logistics of getting beef into markets and possible devaluation of sterling we are certainly in a time of great uncertainty.

“Never has it been more important to sit down and work out how your own farm can navigate through this.”

The current beef price looks a long way off what will be needed to break even next spring