29 January 2025

Can anything more be paid for dairy-beef calves this year?

With beef prices around €6/kg as we head into spring 2025, one question on both dairy farmers’ and calf purchasers’ minds is what price will calves be? DairyBeef 500 Manager, Alan Dillon looks at some of the key variables in play.

Certainly, the increase in beef price that arrived this year was badly needed to give the industry a shot in the arm after two years of overblown meal and fertiliser costs, and then extremely poor weather conditions leading to poor thrive at grass and prolonged housing periods.

It has given beef farmers a bit of a spring in their step and provided them with the opportunity to invest in repairs, maintenance and remedial work around the yard and in the fields that was neglected in last two years when margins were poor.

One fear that calf buyers are constantly bringing up is: ‘will calf prices increase this year?’

While the initial buying cost of the calf is not the biggest part of the investment in a calf to beef system, a moderate increase in prices on a farm with a high stocking rate can erode profitability in the system fast, especially if beef prices were to be lower rather than higher in two years’ time.

Many dairy farmers seem to have big expectations on calves being in big demand this year, with live exports taking a lot of stock out of the country and yearling prices being a lot higher than 12 months ago.

The expectation is that surely farmers will buy calves rather than expensive yearlings? In my opinion, this will not or should not happen without deep consideration. It is rare that farmers who constantly change their system ever win. A move from buying yearlings to buying calves may leave extra cash in the system in the short term, but what do these farmers plan to do in 12 months time when they have no finished cattle to sell?

These type of scenarios are one of the main reasons for a 60% dropout in the number of calf rearers each year. It’s a long game with calves purchased reaching the marketplace in 2027. Who knows where the market will lie at that stage?

Farmers buying yearlings or stores at whatever price have the advantage of only needing to predict 8-12 months ahead. Which leaves the question: are yearlings and stores that expensive? Granted they have risen €200-300 on the past two years but then so has beef price. A 300kg Angus or Hereford yearling costing €1,100 in early spring has only a low cost grazing season ahead, followed by a 60-70 day finishing period. Taking €400 to cover grazing and finishing variable costs, if current beef prices were to persist the farmer would have €400 per head to cover his/her margin and fixed costs. Not a bad return giving the timeline involved and the level of labour required.

Calf rearing on the other hand is a different ball game. Farmers that intend on going down this route need to ensure that they are well equipped to deal with all eventualities.

Sheds need to be cleaned and disinfected prior to calves arriving. Adequate straw needs to be in place and a proper, well ventilated calf shed needs to be operational to ensure no pneumonia outbreaks occur.

There isn’t any room for skimping on costs with calves and a high-quality milk replacer, along with a good vaccination plan and a good quality calf ration are definite requirements.

Calf prices

This leads on then to calf prices. Typically Friesian bulls were costing around €70 early on last year, while early maturing bulls were costing around €200.

Recent Profit Monitor results for DairyBeef 500 demonstration farms showed the cost of taking a calf through to finish is around €1,330, which excludes farmer’s own labour and an owned land charge. These costs would be at the lower end of the scale given these monitor farmers are implementing the best technologies and have a very good handle on costs.

To put this in context, when calf purchase price is counted in, a Friesian steer would need to make close to €1,400 to break even, while an early maturing steer needs to make €1,530 at a minimum to cover its costs.

The demonstration farms averaged 306kg of carcass at 24 months for steers finished in 2024. The average beef price in 2024 was €5.07/kg, a record price for Irish beef farming we have never seen before over a 12 month period. And, although prices are better now, we don’t know where prices will be in 2027. Table 1 below outlines the prospective margins on DairyBeef 500 farms at various calf and carcass prices.

Table 1: The prospective margins on DairyBeef 500 farms at various calf and carcass price

Summary

What can be seen from the above calculations is that even with high levels of efficiency, the dairy calf to beef game is a very tight margin business. Granted beef prices are higher now, but it is obvious that if beef prices were to replicate 2024 in two years’ time any high calf prices will lead to loss making territory.

What the figures show is even efficient producers could be in danger of losing on every head if Friesian prices go over €100 and Angus/Herefords hit over €250. The Commercial Beef Value (CBV) can assist beef famers in purchasing calves and identify which calves are worth more or less than one and another. However, at the same time, every calf will need to find a home. No one should be expected to work for a loss and the dairy industry may be in need of calf buyers next year once the Dutch export market closes its doors to 80,000 Irish calves.

For calf sellers and buyers, the most important thing is the relationship is maintained and this means setting reasonable prices on both sides for calf sales. Farmers may be willing to pay a small premium for healthy calves early in the season and this would be warranted giving beef prices are currently high.

However, dairy farmers need to be cognisant of the fact that for every 10 farmers that walk into their yard or mart ring to buy calves, only four will be still buying in five years’ time. It is a huge dropout rate and highlights the important service calf to beef farmers provide to the dairy industry. If margins are improved in the business, calves will be easier to sell in bad years once the calf buyer is not burnt.

The end price of dairy beef cattle is what is making the headlines in the dairy farmer’s mind, but the costs incurred in getting there and the skill set required to get to that stage and profitably is often glossed over. The calf to beef farmer is an important asset to the Irish agricultural industry and they need to be maintained.

Find out more about the Teagasc DairyBeef 500 Programme here.

Also read: CBV driving performance in west Cork

Also read: Accessing CBV – 3 tools every calf buyer needs to be aware of

Also read: Dairy-beef finishing – the key elements to get right

Also read: 4 reasons why farmers should use the Commercial Beef Value