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Winter beef finishing - will it pay off this year?

Winter beef finishing - will it pay off this year?

Alan Dillon, Manager of the DairyBeef 500 Campaign, takes a closer look at beef markets and examines the prospects for winter finishing.

The question of will it pay to put cattle in a shed and feed them expensive concentrates and silage is an annual one.

Each year budgets are released and by and large the estimates show a substantial beef price rise, much ahead of what is expected, is needed to justify store prices and cover all variable and fixed costs. This is before any margin is taken into account.

While the figures rarely if ever look favourable, each year there is a large cohort of farmers that take on this challenge and incorporate large investments in meal and silage, along with supplying their own farm infrastructure and labour, with no commitment as to what prices will be from Christmas to May.

Prior to Covid 19 hitting the world, beef prices generally didn’t sway too much between autumn and spring. A 20 cent/kg rise in carcass price was generally seen as the best outcome that could be expected and in some years it failed to even reach this level.

Then in and around 2021 everything changed. Beef prices rose from around €3.50/kg to over €4/kg for the first time in a number of years and steadily rose over the next year until they eventually hit near €5/kg. While this was uncharted territory for farmers and a price that farmers had been told was not possible to achieve, the price hovered either side of this €5 benchmark for a number of years since.

Prices have continued to strengthen through the second half of 2024 with supply down and demand rising with bases currently closer to €5.40/kg base price, which may translate to near €6/kg with QA, sustainability bonus and breed bonus built in depending on grade.

These prices are badly needed to bring confidence back into the winter finishing after some questionable returns. One other area to note is the difference between winter and spring finishing price has become much wider. While, as mentioned before, a 20 cent/kg difference would be the maximum expected, now it can be up to 60 cent/kg. When sustainability bonus schemes are added in which incentivise younger age of slaughter this may rise even further.

This autumn has been unusual in that beef prices strengthened from August onwards instead of the traditional end of summer drop. Prices achieved in early summer had disappointed farmers, especially those with under 16 bulls to sell, but there seemed to have been a move to kill more cattle out of the shed in late spring and early summer due to bad weather in 2024 compared with other years that increased cattle supply.

Supply of finished cattle in the autumn reduced then somewhat as a result of this changeover. Combined with a significant drop in weights of cattle due to 2023 weather conditions and an increasing dairy influence on the cattle kill, you had conditions that seemed more in favour of the beef finisher for the first time in a while.

Table 1: Teagasc Beef Budgets for winter finishing steers compared to current beef prices

  Friesian AAX/HEX Continental
Purchase weight (kg) 500 500 500
Purchase cost (€) 1,170 1,355 1,632
Variable costs (meal @ €370/t) 471 471 470
Fixed costs (€) 95 97 101
Total cost (€) 1,736 1,923 2,203
Carcass weight (kg) 326 332 375
Price required (€/kg) for €100/head margin €5.63 €6.09 €6.14
Price returned at base price of €5.35/kg €5.23 (O- grade) €5.63 (O+ grade including breed bonus) €5.61 (R+ grade)
Deficit in price €0.40/kg €0.46/kg €0.53/kg

Price rises need to continue

When we look at the projections for beef released at the National Ploughing Championships this year and compare them to current beef prices, we can see that beef prices are still lagging well behind where the store to beef finisher needs to be to leave a margin of €100/head. Prices have risen steadily over the past two months, but this momentum will need to be kept up well into the New Year if a margin is to be made on these cattle.

It should be noted that the carcass weights predicted are in excess of what is generally achieved nationally and would be more expected by top finishers who have significant expertise in finishing cattle.

Alan Dillon is Manager of the Teagasc DairyBeef 500 Campaign. For more information on the DairyBeef 500 Campaign, click here.

Access the Teagasc Beef Budgets 2023/2024 here.