Winter finishing: dust off the crystal ball again

Every year, winter beef finishers are presented with the same conundrum – “to buy or not to buy, and if you buy, at what price”. It sounds like a line from a Shakespeare play and winter finishers will share their woes with any tragedy.

Winter finishing has been a questionable system for many years now and you wonder how much more losses these farmers can sustain before they go out of business.

If we look back at store prices in October 2018, a beef price of €4.81 was needed in April 2019 to leave a €100 margin for labour.

This was based on the purchase of a 550kg Charolais steer at €2.20/kg. What actually transpired was a base price of €3.75 or €3.99 for a U- steer at 400kg dead.

So a loss of €200 and nothing for labour was incurred on the winter finishing enterprise in 2019.

Will it be any different for 2020? Looking at beef prices, market sentiment and relatively high store prices, there is a good argument it may actually be worse.

Winter finishing and a year-round supply of beef suits processors and avoids any peaks or troughs at different times of the year

With steers currently being quoted at €3.45/kg, base price will need to rise by €1/kg at a minimum to make the enterprise even remotely viable. Processors sit back every year and reap the benefits of a flat-line supply curve.

Winter finishing and a year-round supply of beef suits processors and avoids any peaks or troughs at different times of the year. Whether its loss-making or not to farmers is irrelevant in their eyes. The basic payment will once again be called upon in 2020 to compensate for the losses incurred.

Winter finishing case study

For the case study, we use a farm that is technically efficient. To make a margin from winter finishing, animal performance has to be very high and there has to be a good handle on costs.

Table 1 outlines costs and margins. Daily liveweight gains have been set at 1kg/ liveweight /day.

Protests, disruption, speeches, social media posts, an uprising, talks, talks and more talks. Where did it get us? Some farmers are asking this question at the moment.

One farmer I spoke to this week has 63 steers to slaughter and his factory is helping him out slaughtering three to four per week concentrating on the ones coming close to 30 months.

There is no questioning that farmers are currently getting burnt on cattle purchased in spring

You can’t help but wonder is the current inability to kill extra numbers an “I’ll show you” from the factories.

There is no questioning that farmers are currently getting burnt on cattle purchased in spring and it looks like it will be a similar story for winter finishers.

Processors are highly successful business people and they are using the system whereby farmers continue to use their Single Farm Payment to shore up losses made at finishing cattle to ensure continuous supply for the industry.

What will force change here? A change in mindset from the farmer? You would like to think that people are doing their sums but it doesn’t seem like that. A change in mindset from the processor? Even less likely.

Processors have meddled around the edges on this one for years now

Nobody can argue with a business trying to buy its raw materials as cheaply as possible but you have to question the long-term thinking of our processors who depend on beef farmers remaining in business to make their profits.

Processors have meddled around the edges on this one for years now, offering contracts to large finishers or friends of the business but have been very coy and secretive about any deals done.

The winter finisher takes 100% of the risk in this game and with a hard Brexit looming it is unacceptable for multimillion euro businesses to hang winter finishers out on this one.

Operating a business like this in this day in age is just not acceptable any more and hope or optimism won’t wash with a bank looking for a business plan.

Bottom line

As always with beef factories, it’s about the bottom line. A few months ago, we saw how disjointed and toxic our industry has become.

Four months on, not a lot has changed. The ultimate decision lies with the person writing the cheque in the mart. Do your sums. Talk to your processor. Make an informed decision.

Don’t do what you’ve always done. You’re the only one who cares about your bottom line. Don’t be under any illusion that anybody else in the supply chain does.