Thrive financials - can dairy beef be profitable?

While there will be plenty to see at the farm walk in terms of technical efficiency and hitting performance targets throughout the entire system, what farmers will want to know first and foremost is – can these systems return a substantial profit at farm level?

When talking about the economics of dairy-beef systems, we have decided to talk on a per-head basis. This is because there is such a variation of systems and stocking rates being operated across the country, it is hard to compare a margin/ha on the demonstration farm in south Tipperary with a farm in the west of Ireland. At least on a per-head basis farmers can interpret the figures and then apply them to their own farms.

Net margins range from €86/head to €142/head for each of the various systems, so on the Thrive demo farm this means a per-hectare net margin ranging from €301/ha to €497/ha for 2021, excluding all support payments.

The two biggest factors that affect profitability of dairy-beef systems are purchase price and sale price.

While there is little control over sale price, farmers need to do their best to manage purchase price and work within a budget that they know they can operate at.

Over the last three years, the trend has been the same when it comes to the system financials.

Each year, the early-maturing systems have been more profitable than the late-maturing systems. Within breed type, steer systems have slightly outperformed the heifer systems in two of the last three years.

Perhaps in a system where we are aiming for a slaughter age of between 18 and 22 months, it comes as no surprise that it is more suited to early-maturing animals that tend to be easier finished off grass.

Maybe the system we have employed on the demonstration farm is slightly unfair on the late maturing-type animals as they are being drafted for slaughter with some of their potential being left behind. But the reason for employing the current system comes down to the overall economics on the farm.

Slaughtering at the end of the second grazing season eliminates an expensive indoor winter finishing period and allows the farm to operate at a higher stocking rate as there is no requirement for housing for a second winter period.

What is working for the early-maturing heifer breeds is primarily calf price, plus the fact that they are easily fleshed and have a very low lifetime concentrate input cost.

However, on a negative side, 16% of heifers slaughtered on the demo farm last year took a beef price penalty for either conformation or fat score.

This issue was primarily with early-maturing heifers.

The average grade of the Angus and Hereford heifers was just below an O=, while in terms of carcase fat score the average grade was 4- at an average carcase weight of 263kg at just over 19 months of age at slaughter.

Compare this to the late-maturing breeds of Limousin and Belgian Blue. They graded just below an R- on average at a carcase fat score of 3+ at an average carcase weight of 283kg at just over 20 months old at slaughter.

If we could eliminate the bottom 10% to 15% of calves, it would have a major effect on the overall profitability of the system in place on the farm.

Just over 50% of the bullocks were drafted off grass last year while the remainder were housed for just three weeks pre-slaughter. Again, we are seeing more of the early-maturing type animals being drafted off grass.

What works in the bullock’s favour compared to the heifer’s is a better weight for age. However, they do take slightly more concentrate to get them over the line. At a net margin of €142/head, Angus and Hereford bullocks left the most money, as we have seen in two of the three previous years.

Hitting carcase specification is less of an issue for bullocks, with only 7% failing to maximise the in-spec bonus payment of €20c/kg. However, it was all early-maturing types that did receive a price deduction.

To sum it up, these dairy-beef systems have the potential to leave a substantial profit at farm level. However, in order to do so, a number of things must be in place both in terms of calf quality and technical performance.

It is worth remembering that the calves on the Thrive programme are from known herds and are all sired by high beef merit dairy beef index (DBI) bulls. That means straight away they are better than the average-quality calf on the market so these calves need to be profitable if the average calf is to stand a chance.

Secondly, the physical performance being achieved on the demonstration farm is very good. For this system to work, cattle need to perform every single day they are on the farm.

Every aspect of the system needs to be carefully planned and executed.

From calf rearing and animal health to grassland management, making high-quality silage and finishing stock off grass, everything needs to work.

Also, this farm grew almost 12tDM/ha grass in 2021, around 150% what the average drystock farm is growing each year. For this to happen, soil fertility needs to be correct and grazing infrastructure must be in place to make the best use of the grass grown.

Winter

Finally, the winter period, which is the most expensive period of the entire system, is relatively short on the demo farm. Last winter, stock were housed for an average of 115 days.

This is also helping reduce the overall cost involved in the system, aiding the overall profitability figure.