Monday, April 22, 2024

Tough season ahead for calf rearers as costs bite

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Tighter margins as softer beef schedule casts doubts on saleability.
There are question marks over the saleability of reared calves with a falling beef schedule due to lack of demand from China.
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Calf rearers are facing another challenging season as high input costs and potentially reluctant purchasers mean the likelihood of yet another razor-thin profit margin for those selling Friesian bull or dairy beef calves.

Looking at the season ahead, Paul Muir from On-Farm Research, based at the Poukawa Research Farm in Hawke’s Bay, said while calf milk replacer (CMR) costs have fallen slightly, meal prices are up and labour costs have risen, too.

The saleability of the reared calves also has question marks with a falling beef schedule due to lack of demand from China.

This drop in price could soften demand – but a lot depends on what happens between now and the end of the year when the calves are sold, he said.

“Rearing costs are up on last year, mostly because of small increases in costs across the board. Everything’s sneaked up a bit. My feeling is that the costs of rearing are up 5-10%.”

While prices for four-day-old calves in Waikato are good – $145 in Waikato and $123 in Tirau – he said he doubts this will last when supply hits its peak in August.

Waikato Federated Farmers dairy chair Matthew Zonderop shared this sentiment, saying while the market is buoyant at the moment, in general it begins to fade by the end of July when prices slump and the calf buyers become more particular about what they are buying.

“With the increase in rearing costs, in particular wages up 14% and the lack of capable staff, calf meal up, electricity up, it all adds to calf buyers looking for value for money and essentially driving the price down at the farm gate, making it a loss-making exercise for farm owners and share farmers to sell calves at the market.”

His Murray Grey bull calves usually sell for $110-$150/head.

“Last season they sold for $30, which didn’t cover the costs of the NAIT tag, transport and calf-rearing costs.”

Muir said that on a $6/kg CW beef schedule, a two-year-old 300kg dairy beef bull will sell for around $1800, earning the farmer a $1200 margin over two seasons.

Muir believed the high rearing costs will mean fewer calves reared by rearers, but possibly more will be reared by dairy farmers as they look to supplement their income due to the stagnant milk price forecast.

“It’s very hard to predict how many calves will be reared in total. Keep in mind that rearing calves is a hard game.”

Muir said CMR has fallen by around $10 to range from $80 to $90 while whey or non-curding CMRs will be around $75/bag, about $5 less than last year.

A premium CMR at $85 a bag and fed at 125 g/litre costs 53 cents per litre. At $75 a bag, a non-curding CMR works out at 47 cents a litre.

In contrast, the cost of calf meal has lifted $100 a tonne to be around $1150 for 16% protein pellets and $1200 for 20% protein pellets.

“Because of the uncertainty around ingredients, together with cost of imported ingredients (such as soya meal) in calf meals, few suppliers will guarantee their prices beyond June,” he said.

Muir said it is difficult to provide an accurate indicator of calf rearing costs because every rearer has a different setup. 

Some rearers have ready access to cheaper calves or low-cost whole milk. Larger rearers get better discounts on CMR and calf meals and have economies of scale with labour. Mortality and animal health costs vary. These factors all impact the bottom line, Muir said. 

In a hypothetical scenario, Muir said a rearer will have a fixed rearing cost of around $440 per calf. This includes a $150 margin to cover labour and profit. 

However, the variable costs of calves, cartage and commission at point of selling need to be added to this.

“If the price for good spring calves is $100, rearers need a net average sale price in excess of $540 a calf to be profitable,” he said.

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