Exploit high prices by improving efficiency
BEEF producers need to focus on production efficiency, especially the efficiency of feed use, if they want to make the most of current high prices.
Stuart Ashworth of QMS, who spoke at a series of beef meetings held at four of Scotland’s Marts, says beef prices look likely to remain firm on the back of a tight supply of cows and calves in the chain.
At the events, organised by Bank of Scotland, Keenan and QMS, farmers heard the Scottish beef herd is very challenged following high culling rates.
“There is little prospect of significantly more cattle appearing over the next couple of years so the tight supply will remain,” said Mr Ashworth.
He suggested the supply and price dynamics are also likely to be affected going forward by low animal numbers in many parts of the world.
For example, numbers in the USA are significantly down as a result of the drought in 2011. This worldwide shortfall will limit where alternative supplies can be sought by domestic and international buyers.
“There is a tight supply everywhere so prices will remain firm. There will be no cheap beef for the EU market. How-ever, with consumer confidence remaining fragile, farmgate prices may be constrained by consumers’ unwillingness to pay higher retail prices.”
While the supply and price equation certainly represents an opportunity for those with cattle to fatten and finish, as well as those selling stores, high feed prices are still a big concern, as is the outcome of the CAP reform, which is making many reticent to invest in upping cow numbers.
Sandy Hay, from the Bank of Scotland, said production efficiency equated directly to business efficiency and can give the banks enhanced confidence in lending to those farmers looking to capitalise on the undoubted domestic and export opportunities.
“QMS data shows feed plus forage makes up is 50 per cent of total production costs on average,” he said.
“A 10 per cent reduction in these costs would improve net margin per finisher by £22.31 and a 10 per cent reduction in feeding days from the QMS average of 221 days to 199 days would yield an improvement of £20.65 per head.”
Keenan’s Robert Gilchrist says beef farmers need to look more closely at feed conversion efficiency (FCE) in the same way pig and poultry farmers use it. “The measure of feed conversion efficiency is kilos of liveweight gain per tonne of dry matter fed,” he says.
“This means if feed is costing £150/tonne of dry matter and you were to improve your FCE by 10 per cent, the cost per kilo of gain would fall by 14 pence.”
Mr Ashworth concluded by saying there is certainly opportunity for beef producers going forward, but the one thing that would give them the confidence they need to invest for the future is improving their production efficiency.