Is bull beef profitable? Yes, whatever way you look at it

Press, 20 September 1985, Page 9

Is bull beef profitable? Yes, whatever way you look at it

By

HUGH STRINGLEMAN

Bull beef production can be twice as profitable as sheep fanning, various M.A.F. officers have shown recently, as long as good growth rates are maintained, the export schedule for bull beef stays steady or rises, and calves can be purchased at reasonable prices.

Gross margins for different variations of bull beef raising have been calculated between $3O and $5O a stock unit per year, versus $l6 to $22 for sheep breeding operations at present.

Not surprisingly bobby and weaner calf prices are reflecting this profit potential as sheep farmers seek to diversify into a livestock species with a brighter future.

But even at higher calf prices and the present export schedule, which has dropped about 30c to 40c a kilogram in recent months, gross margins of $3O a stock unit each year are still possible, say the M.A.F. advisers.

Farmers within the circulation area of “The Press” have been offered a range of such optimistic advice recently, partly in response to the looming drop in sheepmeat schedule prices. On the West Coast, which has much more of a history in beef cattle than the drier east coast, farmers have been urged to consider more bull beef raising to offset declining sheep returns.

Bobby calf prices up to $9O and $lOO and weaner (10 week) or contract-reared prices of $l5O to $l6O are now common, with Friesian calves by far the most popular for bull beef operations.

Calves have been trucked long distances this spring, for example, from the West Coast to Southland, to satisfy the demand from farmers seeking to diversify.

The new owners of these growing bull calves will be watching the export schedule very closely over the next 18 months and some optimistic signs are already apparent.

• The New Zealand dollar, which as it strengthened during the last two months took $6O to $BO a head off the selling price of a finished bull or steer, is now reckoned by the money market pundits to be at its strongest and must be heading for a fall.

• The United States cow kill is expected to drop as ranchers rebuild their herds and therefore the price of imported manufacturing beef (the destination for 85 per cent of New Zealand’s beef exports) is expected to rise from its present 100 U.S. cents a pound c.i.f. Fully reflected in the export schedule, every one cent drop in the exchange rate means a 5c a kilogram rise in bull beef carcase prices and every one U.S. cent rise in the c.i.f. return per pound means a 3c a kilogram rise in the schedule. • Interest rates are expected to fall, if farmers can wait long enough.

So if the M.A.F. can demonstrate a healthy level of profitability in bull beef right now, this can only improve still further, can’t it? Read on for the good news.

Three main options exist for potential bull beef farmers. They can buy bull calves and rear on contract, or buy calves and rear them through to finishing and selling at 18, 27 or 30 months, or buy weaned calves and sell them finished.

Mr Dave Ashby, a farm adviser with the M.A.F. at Rangiora, has costed out these options as part of the advice on diversification being formed and published by that office. In the first option a calf can be purchased at four days old for $BO and reared until weaning at 10 weeks for a further $7O, he estimates. Milk powder obviously absorbs most of the rearing costs, but after small allowances for power and water, vet fees, building depreciation and calf losses, about $8.50 a calf gross margin is possible. The number of calves that can be carried is in theory limited only by the labour available. The large bull beef operators usually buy on contract at weaning, at an average price Mr Ashby has included in his costings of $162.50 for 65kg liveweight. Calf rearing is a labour intensive and cheese paring business but larger gross margins have been calculated by other advisers using lower bobby calf prices and higher weaning weights. Mr Ashby reminds intending calf rearers that , colostrum within 12 hours of

birth is critical for a calf, shelter must be provided, meals should be provided from day seven and tagging, weighing and recording of growth rates will help saleability. Gross margins of up to $39 a stock unit annually have been calculated by Mr Ashby for the rearing and finishing options. The calf purchase and costs to weaning have been included at $l5O a head, except for the contract cost at weaning of $162.50. To these initial costs must be added a percentage for deaths (5 per cent is reasonable); animal health of about $5 a year; about 10 bales of hay per bull each winter ($30); $l5 for cartage and interest on capital employed, currently at 21 per cent.

Mr Ashby suggests a realistic target at 18 months of 230 kg carcase weight and at the current schedule of $2.15 a kilogram such a bull would return $495. After costs the gross return would be $234 and for a cattle beast which is the equivalent of four stock units, over 18 months, this represents a gross margin of $39 a stock unit annually.

Another beef cattle adviser for the M.A.F., Mr Peter Packard, told the West Coast Farmers Conference during the winter that $4l a stock unit annually would be the expected return from such an operation. Mr Packard assumed a lower weaned calf cost of around $lOO but his returns were calculated on a 200 kg carcase (at 20 months) with a $2.25/kg schedule.

the worst combination of Messrs Ashby and Packard’s figures would be $l5O weaned calf cost, 200 kg carcase weight sale at 20 months on a $2.15/kg schedule and the gross margin generated would be $29 a stock unit annually. It will be apparent that only small deteriorations in any of the factors which generate gross margin — purchase, costs, schedule prices, carcase weight — can reduce the gross margin quite substantially, which has been pointed out before by Canterbury’s biggest bull beef raiser, Mr Rod McKenzie, of Motunau. In response to the latest surge of interest, Mr McKenzie said this week that profitability was highly sensitive. He felt that 200 kg was a more realistic carcase weight target at 18 or 20 months, even with implanting, which he personally believes is essential for increased weight gains and behaviour control. There were difficulties in getting higher weights on spring-born calves, he said, and if the diversification is to be more than a one-off then an overlap of finishing

bulls with incoming calves must occur from the second year. December through February is usually going to be a difficult period for bull beef operators. They need good management skills and should be comfortable witn steer raising before taking on bulls, believes Mr McKenzie.

The Rangiora M.A.F. also investigated taking bulls through to 27 months when a carcase weight of 330 kg is aimed at. The gross return of $7lO is reduced by the same costs as for the 18month option plus an extra $5 for animal health, $45 for hay during the second winter, and $BO for interest on capital over the period, compared with $4B. The gross margin for this option, with the stock unit equivalents for the larger animal raised to five, works out at $31.50 a stock unit annually. The specialist bull beef operator who buys in con-tract-reared calves at 10 weeks is paying slightly more than if he raised the calves himself and therefore his gross margins are slightly reduced to $36.33 a stock unit annually for the

18-month sale and $3O for the 27-month sale.

By way of a cross-check on Mr Ashby’s figures, another farm adviser, Mr Keith Stewart, of Palmerston North M.A.F., said at the West Coast conference that bull beef animals grazed until slaughter at 18 or 20 months could return $36 a stock unit annually. His example assumed 244 kg carcase weights and an all-in calf cost at 10 weeks at 100 kg liveweight of $220. The gross margin generated at the then schedule of $2.45/kg was $4B a stock unit annually. At the current schedule of $2.15/kg the gross margin is $36, which compares favourably with those calculated by Messrs Ashby and Packard.

To end his paper, Mr Ashby advised that finishing bulls would require drenching of calves two or three times in the autumn and again in the spring, control of external parasites, Ralgro implants at weaning at 90-day intervals and liveweight gain targets of o.3kg daily in the winter and Ikg daily in the spring and summer.

At the West Coast confer-

ence a Westport beef specialist, Mr Derek Parsons, said he was getting o.skg during the winter (obviously milder than the east coast) and Ikg during the spring summer and autumn, with a peak of I.3kg daily mobbed up or 2kg from some outstanding individuals. The average over-all daily gain on the Westport unit was o.6kg.