Intensive Beef Production Costings

Calculating the cost of beef production can be inherently difficult when the cattle are managed on a grazing/forage system.  This is because a proportion of the costs are in land/rent, grass establishment costs, machinery etc.  These costs are sometimes difficult to apportion to the beef enterprise on a mixed farm.  Therefore in this article about beef production costings and performance we will look at intensive cereal beef production.   In this system cattle are housed all year round and fed a diet which usually consists of rolled barley mixed with a protein concentrate (often beans, soya or rapeseed meal) and finally the diet is fortified with vitamins and minerals.  It is important for the cattle to have roughage in their diet and so cereal straw is offered ad-libitum.

Even in todays modern business environment many farmers will be unable to quantify their costs of production and performance can vary from one farm to another so we have used data from Harper Adams University College.  This is the college where I studied agriculture and has a high reputation for the research and trial work that the animal science department undertakes.  This data was compiled by Senior Animal Lecturer Simon Marsh.  Anyone looking at other data from the Harper Animal Science department should look out for the work of Dr Liam Sinclair – a highly respected lecturer who is fastidious in his work.

Financial Performance (£/head) Holstein bulls marketed Jan-April 2006

OUTPUT

Sales                                                                       510

Less calf purchase and mortality                                    10

Total Output                                                                         500

VARIABLE COSTS

Calf rearing to 3 months                                               41

Finnishing concentrates                                              225

Vet and medicines                                                       11

Bedding and other costs                                               41

Total variable costs                                                             318

GROSS MARGIN/HEAD                                                         182

PERFORMANCE

Months to slaughter                                                    13.7

Weight at start (kg)                                                    42

Weight at slaughter                                                   547

DLWG (daily liveweight gain)                                           1.33

Carcass weight (kg)                                                   284

Killing out (%)                                                             51.8

Daily carcass gain (kg from birth)                                     0.70

Carcass grade                                                          -O/O+3

FEEDS

Milk replacer @ £985/t (kg)                                            23

Calf concentrates @ £157/t (kg)                                   117

Finishing concentrates @ £91/t (kg)                             2478

FCR (kg feed/kg gain)                                                     5.18

From 2001 to 2006 intensive beef production has been profitable.  Largely due to steadily increasing beef prices and to low cereal costs. 

In 2004 the Gross Margin was £280/head but included a subsidy payment which is no longer available to producers.  The 2006 Gross Margin as calculated above is still financially worthwhile to beef producers and production would continue at these margins.  The question for beef farmers is what the economics will be for 2007/2008.  Calf prices have risen and Holstein bulls are averaging about £70/head, added to this cereal prices have risen sharply (good for cereal farmers) and today stand at about £109/tonne for November 2007.  The finishing concentrate cost recorded above in the table includes protein concentrate and mineral supplementation and so with cereals at £109/t the finishing concentrate cost during 2007/8 would be about £125/t.  Multiply this by 2.47 tonnes and add the extra cost of the calf and this will add a total of £144/head to production costs and hence only leave a gross margin of £38/head.  This would be insufficient to cover fixed costs such as labour, buildings depreciation, electricity, water, etc.

So what does this mean for beef farmers and the future?

The price of beef must rise to compensate for these costs.  Approximately 10 years ago the price of meat products fell quite dramatically and within 2 years the price of cereals followed, so maybe the opposite situation will occur and the price of beef, pork, chicken and turkey will rise on the back of the cost of cereals.  So beef farmers who fill their cattle yards with calves now are taking a gamble that prices will rise.  If the beef farmers do not buy the calves what will happen?  Calves could be exported for veal production on the continent or they will be killed at birth.  These are the harsh realities of the economics of livestock production.  The destiny of the animals probably lies at the hands of the British supermarkets.  Will the supermarkets buy beef on price alone and ship carcasses from South America or will they support a welfare friendly system in the UK.  It would not be the first time that calves have been slaughtered at birth in this country in the past decade.  Waitrose are currently looking into this situation and are working with Compassion In World Farming to put together a scheme whereby calves can be kept in the UK and will be supported by a welfare friendly production system (rather than exporting the calves).  Let’s hope this scheme gets off the ground and sooner rather than later.  Where are Tesco, Sainsburys and Morrisons?  Farmers can only respond to the consumers and the supermarkets – it is in their hands!

Written by Steve @ Farming Friends

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