High cattle prices bring concern

Press, 4 May 1984, Page 9

High cattle prices bring concern

By

DAVID LUCAS

Farmer confidence in the beef industry has turned full circle during the last 18 months.

In late 1982, farmers got despondent even talking about beef and thousands of breeding cows were slaughtered because beef farming was considered uneconomic. But today the beef industry is experiencing a boom throughout New Zealand as farmers look upon cattle with renewed enthusiasm. Store cattle prices, particularly for calves, have snowballed to record heights this season as farmers have clamoured to join the swing to beef. A major reason for this upsurge in interest is the ample supply of feed on farms throughout New Zealand. After severe droughts in many parts of the country, this season has been an excellent one for feed growth, which has given farmers confidence in having sufficient feed to fatten stock properly. This excess of green grass combined with a shortage of cattle and doubt about the future of lamb has led to high prices for store cattle. In North Canterbury, good steer calves have been fetching $3OO to $370, with some exceptional calves making over $450. This trend is similar in other parts of New Zealand. In Southland and central North Island calf prices have also exceeded $450. These high prices are good news for calf breeders who have had to accept low returns in the last few years because of the drought and the depressed outlook for beef. Many breeders were forced to reduce their number of breeding cows. But some experienced observers feel that farmers have gone overboard in paying big money for calves, and many will be hardpressed to make a profit at current prices for fat cattle

by the time the calves are ready for slaughter. A North Canterbury bull beef fattener and animal production consultant, Mr Rod McKenzie, has questioned whether farmers had done their homework before deciding to buy calves this season. For a $330 steer calf with a liveweight of 200 kg, Mr McKenzie has estimated that the steer would have tost the purchaser just over $4OO by mid-February next year, the earliest it would be ready for slaughter. These costs include transport, animal health, interest on the purchase price and allows for a death rate of 2 per cent, but does not take into account the cost of winter supplementary feed, such as hay. By mid-February, the steer could have a liveweight of 405 kg, just over double its weight at purchase, provided it had grown well and had suffered no setbacks. Typical gains in liveweight, according to Mr McKenzie, would be o.6kg per day during autumn, o.3kg in winter, I.lkg in spring, and o.7kg in summer, giving an average daily rate of 0.68 kg a day for 300 days. At the present price for beef of 200 c a kg (with commission deducted) the steer would return a profit of about $5 if it was slaughtered in mid-February. If the steer did not grow well and the average daily growth rate was less than 0.68 kg, the small profit margin would be eroded. The steer would probably not be fat enough to slaughter in mid-February and would have to be kept on the farm during summer and autumn. However a rise in beef

prices would return farmers a higher profit margin. According to Mr McKenzie, farmers need a profit margin of $25 per stock unit a year, which equates to $l5O a cattle beast, to maintain farm expenditure and inputs. Over the 300 days of the steer-fattening exercise, the profit required would be $lO5.

So a rise in beef prices would be welcomed by farmers when this year’s calves are ready for slaughter.

Prices on the domestic market tend to rise during winter, and this season have been slightly higher than the beef export schedule. During the last few weeks, the export schedule has dropped 15c a kilogram and prices

at this week’s Addington market reflected that reduction.

North America is New Zealand’s major market for beef and prices to New

Zealand producers depended largely on the United States’ economy, according to Mr K. J. Armstrong, chief agricultural economist (meat and wool) for the Economics Division of the Ministry of Agriculture and Fisheries.

Mr Armstrong said little difficulty was foreseen in selling beef for the next few years and a representative from the United States Department of Agriculture had recently indicated that some improvement in the beef market could be possible during the next two years. However, this improvement could be only minor and farmers should not expect great increases in prices.

In fact, if the 1 United States’ Government cut back on expenditure because of its internal deficit it could lead to a reduction in prices for New Zealand. There has also been talk of a devaluation of the U.S. dollar which would count against New Zealand producers, unless New Zealand also devalued.

Apart from North America, New Zealand exports beef to Japan, South Korea and parts of South East Asia. Little difficulty is expected in selling beef in the next two years because New Zealand will produce less owing to the reduction in breeding cow numbers and Australian production would be down also because it is rebuilding cattle herds after severe droughts. Because of the shortage of production from New Zealand, which was foreseen some time ago, the M.A.F. has for the last year advised farmers to retain dairy breed bobby calves, instead of slaughtering them. This is seen as the best method to build up beef production in a short time.

A total of 420,000 bobby calves were estimated to’ have been retained during last spring calving, compared with 250,000 the previous year.

This dairy breed beef can be ready for slaughter in 18 months to two years compared with the four years it

takes for beef-breed heifers to be mated and their offspring held until prime. The keen demand by farmers has not been confined to weaner calves as bobby calves and adult store cattle have been fetching high prices also. At the Addington market, both beef cross and Friesian cross bobby calves have topped $BO, and store cattle have regularly sold in excess of $5OO.

A feature of store cattle sales this season has been the large number of new faces present. Although some traditional cattle fatteners have decided not to buy cattle this year, most have purchased limited numbers, competing for a reduced yarding of cattle with farmers not normally involved with beef. This outside interest has contributed to the buoyant tone of the sales. Some fr the futi’ <f

warmers say ie .ure 01 beef looks good compared with lamb, and it is worth a gamble to get into the beef industry.