Summer grazing - did it leave profit this year?

Summer grazing of store cattle to sell live or slaughter is one of the more widely practiced systems in Ireland. Alan Dillon, Teagasc Beef Specialist, discusses the profitability of summer grazing and provides budget information.

Typically run relatively extensively with low levels of chemical nitrogen. It is a relatively environmentally friendly option with lower inputs than typically higher stocked dairy calf to beef or suckler to beef systems. Fixed costs are typically lower on these systems due to lack of a winter housing requirement.

Beef prices from late spring 2021 have been more favourable than many would have expected at the start of the year following on from 4 years of largely depressed beef prices. Store prices this spring rose also on the expectation of a higher finished beef price at the years end. With slaughtered cattle numbers expected to drop by 120,000 head in 2021 farmers are optimistic of prices holding much higher than experienced in recent years heading into the winter period.

As the store cattle purchased in the spring period begin to finish for slaughter the question is what, if any margin did they leave.

Teagasc compiled a store to autumn finish budget in April based on current beef and store prices. This is outlined in table 1, for the purposes of examining margins this article will focus on steer profit.

Table 1: Store Prices (Week Ending 10th April 2021)

Table 2: Steer Store to Finish Budget 2021

As can be seen from table 2. It will cost between €1285 and €1599 to take a steer though to finish this year off grass taking purchase price and variable costs into account. The negative margin per head of -€29 to -€71 per head when fixed costs are added in for steers of various quality leaves a €3.80 base as very unattractive. At the time these figures were compiled in the spring it was questioned as to whether beef price would even be as high as €3.80 come autumn time.

Table 3: Assumed Margin on Steer Finishing at €3.80 Base Price

Table 4: Margin at €4.15/kg Base vs Spring Store Price

Table 4 shows the increased margin based on the current beef price of €4.15/kg. While all classes of stock moved into positive territory for a net margin it highlights how out of sync store prices were in the spring compared to a beef price of €3.70 to €3.80/kg.

Conclusions

While we have seen summer grazers make a net profit from their operations this year. It must be highlighted that this came off the back of a vastly increased beef price. Input costs have increased somewhat this year with fertilizer prices taking the biggest jump. However given the typical low level of stocking density on these summer grazing farms the price increase of the fertilizer wouldn’t have affected these farms to a massive degree. The question remains now for these systems into the next 12 months that if store prices increase again next year on the back of a favourable 2021 beef price, what factory price in 2022 will be required to leave a margin for summer grazing systems next year?