Sunday, August 14, 2022

Rearers exit as financial risks multiply

Scarcity of contracts with finishers drives exodus, researchers say.
The financial risk of rearing calves is increasingly being borne entirely by rearers, more and more of whom are leaving the industry.

Fewer Friesian bull calves will be reared this year as more rearers exit the industry because the financial risks involved in taking on the animals has become too high.

The lack of profitability, with rearers unable to secure contracts with finishers, is driving the exodus, Hawke’s Bay calf-rearing researcher Paul Muir said.

Not having these contracts means the rearers carry all of the risks when growing the calves.

“Rearers rear calves because they enjoy it but they make fine margins at the best of times. If they can’t sell their calves for a sum that allows them to make a reasonable profit then eventually they lose interest in rearing,” Muir said.

Bull beef finishers are reluctant to sign contracts because they prefer to take a risk on the spot market. 

If the season is dry and there is an oversupply, a finisher can often buy a calf for a much lower price than they could if they had a contract.  

High input prices have also pushed up rearing costs. The high milk price has lifted the cost of milk powder  10%-20%. Increases in grain prices have lifted the cost of a meal by a similar percentage.

Muir said it would not be unreasonable for a rearer to price their calves at $560 for a reared calf in December. It would cost the rearer about $430 to rear the calf, along with its purchasing costs.

With meat prices sitting at $6.20/kg for a 300kg bull in the North Island, in two years’ time when it hits its finishing weight, that $560 calf will be worth about $1860 – a $1300 margin for the finisher, he said.

Taranaki-based PGG Wrightson stock agent Jeff See said he knows of at least four rearers who have pulled out this season because of the increases in rearing costs and financial risk.

Some rearers are also starting later – if they start at all, he said.

Some are skipping Friesian bulls and waiting for the dairy-beef crossed calves to start appearing. He believed these issues are being replicated across the North Island.

“We want to be positive, but I can see in two years’ time there’ll be nothing left to kill and every year our national beef herd is coming down. If we can’t find anyone to rear these calves, we’ll have nothing to trade.

“We really have to help the rearers and find a way to help them out.”

He said the four-day-old calf market so far has been very slow, with the calves selling for $80-$120, averaging $100. Numbers coming forward for sale are also back, along with demand.

The lukewarm market means some are considering putting their calves on the bobby truck. But the meat companies are struggling to keep up with the collection because of staffing shortages, he said.

Taranaki dairy farmer Paul Johnston said instead of having calves picked up every second day as was normal practice, this season they are collected on Monday, Wednesday and Friday, have to be pre-booked, and only the number designated will be picked up.

It has become a race with other farmers to get space booked, and holding the extra calves on farm requires careful management.

PGG Wrightson national dairy specialist Jamie Cunningham said it is too early in the season to get an accurate read on calf prices and the number being reared.

Early sales indicate Friesian bulls are selling relatively well, albeit at prices about 10%-15% back on last year, and beef-cross are selling well.

Alliance livestock and shareholder services manager Danny Hailes said they are processing more bobby calves than usual this season, requiring three days’ notice when booking calves and only accepting calves from existing suppliers and shareholders due to plant processing capacity constraints.

Silver Fern Farms chief supply chain officer Dan Boulton said it is also faced with tight capacity constraints and is managing calf intake to optimise processing.

This could mean farmers waiting longer for calf collection at the peak of the season.

“We are anticipating pressure will start easing over the next few weeks,” Boulton said. “The company has rolled out a Calf Booking App for farmers to help control intake and avoid animal welfare risks or animals left behind.”

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