Table Impact of Calf and Beef Price on Dairy Beef Margins
While these are two factors the farmer has little control over - and some will argue that farmers should focus on factors they can control within the farm gate - it is interesting to see how margins an be totally eroded when lower beef prices are paired with high calf prices.
As events in recent years serve to remind dairy farmers, high prices are not always 'there to stay'.
With the high prices being paid for dairy-beef calves this year, a drop in beef price could have a detrimental impact on the profitability of dairy-beef systems.
In the week ending Sunday, July 13, the average price paid for Angus bull calves from 3-6 weeks-of-age was €506/head, according to the Irish Cattle Breeding Federation (ICBF's) calf price database.
At a recent Teagasc dairy-beef farm walk, the impact of calf purchase price and beef price on the profitability of dairy-beef systems was highlighted.
The table below shows the impact of calf price and beef price on net margins using four beef prices and two calf prices:
Source: Teagasc
For the purpose of the above table, the cost of rearing the calf to beef at 20 months-of-age is assumed to be €820.
Where the purchase price of the calf is €350 and a carcass weight of 250kg (heifer carcass) is assumed, at a beef price of €6/kg the system will generate a loss of €20/head when variable and fixed costs are factored in.
On the other hand, where the calf purchase price is at €200/head and the same beef price is included, the net margin is at €130/head.
Assuming beef prices stay at the higher levels and a beef price of €7.50/kg is assumed, with variable costs at €820, and the calf purchase price at €350, the system will still generate a margin of €355/head or a net margin of €888/ha when stocked at 2.5 heifers/ha.
While many of the costs may differ for farmers, the table shows the importance of farmers doing their own figures.
It also highlights the risks associated with the higher calf prices when it comes to generating a margin from the enterprise at the other end of the line.
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