Forward contracts are rare in the beef industry, but they must become more common if producers are to continue finishing animals, according to one Irish producer.
Rathkilly, Co Carlow-based Derek Deane consistently achieves top grades at slaughter, but says without forward pricing it is difficult to budget finishing costs.
Mr Deane’s suckler herd is mainly Limousin because the breed is compatible with his system and he believes it’s eminently suitable for crossing with the Belgian Blue, producing high-yielding, double muscled animals for the quality beef market.
This year he sold 50 17-month-old bulls, achieving 30 E grades and 20 U grades at the abattoir.
Calves are born between early March and mid-May and are immediately turned out to grass.
After weaning in early October daily weight gains at grass average 1.5kg/day for bulls and 1.2kg/day for heifers.
Cows are housed in October, while calves are fed an ad-lib concentrate at grass until mid-November.
At this point Mr Deane implements an intensive feeding regime based on a high-energy diet of toasted cereal and flake meal, soya bean and citrus pulp.
Intakes peak at 12kg with daily gains of 2kg through to finishing at 17 months.
This year bulls averaged carcass weights of 483kg.
But he says his high-cost system relies on a contract price being set in February for cattle slaughtered between May and July.
“I am offered a price and then I decide whether I will finish them off for the factories or sell them live,” he says.
Mr Deane suggests more contract prices are needed between February and June to guarantee a margin over costs and ensure a supply across Europe.
But, in many cases, buyers are unwilling to fix a price, he says.
“Factories are not prepared to quote a price for the following spring, which presents farmers like me with a huge cash-flow problem,” he says.
“I want contracts with prices to give me the security of knowing what I am going to be getting paid.
It means I can calculate my costs and see whether it is viable.”
The problem, he says, lies with cheap imports of fillet and strip loin beef from South America.
“The answer is an import quota and a clear directive from policy makers that what they want in Europe is sustainable agriculture.
“My business is viable at the moment, although it is coming under increasing pressure and there is little I can do.”
His real concern is that in time South American producers will match British and Irish farmers in terms of quality, but retain their competitive advantage.
“If that happens the game is up,” he suggests.
And Mr Deane’s sheep enterprise is also coming under increasing price pressure.
As a member of the Baltingass Producer Group he gets paid a premium by the French market for lambs from his 250 breeding ewes.
He says sheep had been reasonably profitable until this year when he saw a marked drop in price.
“Last year we were receiving 2.86/kg, but this year it was 2.46, despite a rise in fertiliser, feed, power and labour costs.”
To counteract the falling income from his livestock enterprises, Mr Deane has entered the Rural Environmental Protection Scheme (REPS).
But he is uncomfortable with shrinking his core business.
The maximum stocking rate stipulated by REPS is 1.7LU/ha which means he will have to reduce sheep numbers by 30%.
“The best way for me to be sustainable is to decrease output, but this is of huge concern to someone trying to make a living out of producing beef and lamb,” he adds.