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Doug Dear operates an intensive beef finishing unit with a difference on the outskirts of Selby, Yorkshire.
Rather than purchasing cattle for finishing, where large sums of capital are tied up in livestock, Doug runs a contract finishing enterprise whereby he basically provides a bed and breakfast arrangement for a set fee.
Under the arrangement, farmers transfer cattle to Doug’s farm, while still retaining ownership of the animals.
Doug provides feed, housing and labour as well as booking cattle for slaughter and haulage to the abattoir.
From arrival on farm, cattle are intensively finished over a 90-day period, with the exception of young bulls, which are fed for 120 days.
Once the finishing period is complete, cattle move to slaughter with payment issued directly to the owner.
The cattle owners are then billed to cover feed and labour costs during finishing.
Around 2,000 cattle are finished annually and supplied by 40 clients from across the UK. The system has been in operation for a decade.
Prior to this, Doug was purchasing dairy-bred cattle for finishing. He decided to cease the enterprise due to low margins being returned on his investment.
Cattle type
Steers and heifers are predominantly finished on farm, with housing for 700 animals at any point in time.
Cattle must be a minimum of 400kg before arriving to the feedlot, with bulls at a minimum age of eight months old and properly weaned prior to movement.
To minimise the risks of disease to other cattle on farm, as well as the new intake of animals, there is a strict health protocol in place.
All cattle must be vaccinated against RSV, PI 3 and Pasturella at least two weeks before arriving at the feed unit.
Any additional costs for veterinary treatment whilst on the feedlot are then billed to the owner of the cattle.
Management
A minimum group size of 15 cattle is required for finishing, with animals housed in groups of 30 to simplify feeding and management.
Cattle are weighed on arrival to the feedlot. They are then weighed midway through the finishing period and again, as they move to slaughter.
The middle weight is used to gauge animal performance. Cattle that are failing to perform, based on the group average and cattle of similar weight, are removed at this point and finished.
Doug maintains there is no financial benefit to holding these animals for another 45 days, as their weight gains will not cover the daily feed costs.
An electronic tag is given to every animal to help with record-keeping with so many different cattle groups on farm.
Ration
All cattle are fed daily at 8.30am with one ration fed across all cattle, regardless of breed type or sex, to simplify management.
The ration consists of maize silage, barley, peas, beans and straw which are all grown on the farm’s 1,000ac arable unit. The unit is 80% self-sufficient in producing homegrown feed.
Additional feed purchased includes maize distillers, grass nuts, beet pulp, molasses, rumen buffers and minerals.
The feed value of the ration is 65% dry matter, 12.2 ME and 13.1% protein. It costs £127/t (€146/t) and is fed at 2.5% of cattle liveweight.
Doug prefers to use high-quality straights with consistent feed value, rather than cheaper byproducts that are lower priced, but more variable dry matter.
Feed costs
All cattle are fed through a mixer wagon which weighs out an allocated amount of feed to each pen based on cattle weight.
On average, cattle consume 16kg/day fresh weight of the ration, which costs 12.7p/kg as fed in February, or £2.03/head (€2.34) every day.
On arrival, cattle start off eating 50% of their daily feed requirement. This is built up to ad-lib levels over the next two weeks to avoid the risk of acidosis.
Other costs
Along with feed costs, a standard daily fee is charged to cover labour, housing, bedding and machinery running costs.
This cost varies depending on the client and number of cattle being fed, but the approximate charge is £1/day (€1.15) for a new business, bringing the total daily costs of finishing cattle through the system to approximately £3/day (€3.45).
All costs are agreed at the outset, so that both parties are clear of what is included under the arrangement and what is not. Farmers have the option of paying every 30, 60 or 90 days.
Cattle performance is good with continental steers and heifers typically gaining 1.6kg to 1.8kg per day, while dairy-bred types typically average 1.4kg/day.
Economics
Along with Doug, there are two full-time labour units on farm employed between the cattle and arable enterprises.
To cover all three wages, there must be 470 cattle on farm every day before factoring in other costs. The unit is rarely below 75% of capacity at any point in time.
For the farmers supplying cattle, there is the advantage of an improved beef price for their animals due to the regular supply of cattle moving to slaughter.
At 1.6kg/day to 1.8kg/day, carcase gain is 0.9kg/day to 1kg/day, which means a daily income of 340p/kg to 380p/kg (€3.91/kg to €4.37/kg) at an R4L price of 380p/kg (€4.37kg).
Mutual benefits
The system also offers smaller farmers with limited access to cereals, straw and alternative feeds the opportunity to move animals to a unit that can avail of cheaper feed prices due to economies of scale.
As a Licensed Finishing Unit (LFU), the farm can take cattle from farmers with animals under TB restriction and where housing is limited.
To maintain the LFU status, all animlas on Doug’s unit must move direct to slaughter, with testing required every 120 days. For Doug, the finishing arrangement has multiple benefits. Primarily, the unit brings in additional cashflow which enables him to retain two full-time employees all year round, something that would be difficult on an arable only unit.
Finishing cattle also adds value to crops and straw used for bedding provides farmyard manure which is recycled through the arable crops.
Future plans are to expand housing to increase cattle throughput to 2,500 head annually.
A group of 16 beef farmers from Northern Ireland recently visited the unit, funded through the Farm Innovation Visits scheme (FIV) which is facilitated by CAFRE.
Launched last year, the FIV scheme offers farmers from all production sectors in the NI agri-industry the opportunity to learn from businesses applying technologies which are not available in NI.
The objective is for farmers to study and implement, where possible, some of the key learnings to improve efficiency on farm, animal health, welfare and make systems more environmentally stable.
Cost comparison
Two out of the 40 clients working with Doug are based in Northern Ireland and supply an estimated 300 cattle annually, mainly stores purchased through the live trade.
The merits of shipping NI cattle for finishing to the unit were discussed in depth. The consensus of the group was that it is not a business model for farmers producing high value weanlings.
However, for farmers focussed on using proven maternal genetics, there are potential benefits in linking up with a similar finishing unit to add value to cattle, especially if finished as young bulls.
However, the margins on steers or heifers would be less clear and heavily reliant on purchasing animals at value for money but capable of increasing conformation during the finishing period.
For instance, buying a good-quality continental store heifer weighing 480kg last October at 210p/kg (€2.41/kg) would have cost £1,008 (€1,156), based on MartWatch data.
Doug prefers that cattle are not moved directly from the mart, so allow for 30 days before moving to the feedlot, at an estimated transport cost of £40 per head.
Liveweight on arrival to the feed unit is unlikely to be much more than 480kg, due to weight loss during transit and re-acclimatisation. Assuming a gain of 1.7kg/day over the 90 days, final liveweight would be 633kg. At a kill-out of 57%, carcase weight is 360kg.
Feed costs at £3/day (€3.45/day) for 90 days are £270 (€310), bringing the total costs to £1,318 (€1,514). Based on a 360kg carcase, the required beef price to breakeven is 366p/kg (€4.20/kg).
Breakeven
Official price reports for beef cattle in the north of England averaged 362.4p/kg (€4.16/kg) for R4 grading animals for the week ending 16 February.
Higher quality cattle grading U, which is closer to the type of cattle moving from NI to Doug’s finishing unit, averaged 371.4p/kg (€4.26/kg).
This is the official price reported and does not take account of any premiums for breed or supply agreements. While the margins appear small, there are additional factors to bear in mind.
Larger numbers of cattle moving through the feedlot and repeat customers are charged a lower fee to cover labour, machinery and housing. This can tip the economics in favour of finishing under the arrangement.
Buying cattle for a cheaper price, but still capable of achieving high levels of performance also can add to the profit margin, as will the timing of sale.
As with Irish markets, demand for beef is weak in the UK with prices falling from 375p to 385p/kg (€4.31 to €4.42/kg) last autumn for R and U grading animals.
Bull beef
With higher weight gains in young bulls, as well as improved conformation increasing the value of the sale price, the consensus was there is a possibly a good margin to be had on finishing young bulls under the contract arrangement.
The margins are particularly in favour of the spring-born male calf being finished as a young bull in May to June, as the ration costing £127/t (€1.45/t) is over £100/t (€115/t) cheaper than compound rations on offer in Northern Ireland.
Weight gains of 1.8kg/day to 2kg/day would generate a daily carcase gain of 1kg/day to 1.18kg/day at 59% kill-out.
Over a 120-day finishing period, total weight gain would be 160kg to 240kg of liveweight. Assuming the animal was 400kg on arrival, carcase weight would be close to 377kg at 59% kill-out.
At a purchase price of 230p/kg, the 400kg animal costs £920 (€1,057). After applying the transport costs and finishing costs (120 days at £3/day), total finishing costs are £1,320 (€1,517), which converts to a breakeven price of 350p/kg (€4.02/kg).
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