DOESTHEPRICESTACKUPTOTHEPRODUCT?
DOESTHEPRICESTACKUPTOTHEPRODUCT?
With uncertainty over
finished markets,
Robert Davies asks a
consultant and producers
whether the store-buying
calculations stack up.
VENDORS and buyers of stores will be asking themselves the same question at this autumns sales: Is the price worth it?
Adding to concern is the fact that many traditional store buyers are short of grass and have insufficient conserved fodder which may add caution to buyers actions.
The dilemma for store lamb sellers will be whether they can carry lambs until the market price is reasonable, or even try to finish them at home. Few of the upland units that supply notoriously volatile store markets have grass or arable by-products available for rapid finishing, so they have to decide on an achievable marketing date.
The question is whether the likely end price and weight gain generate a reasonable return on the capital and labour employed? Economists and consultants are naturally very reluctant to give firm advice.
Dennis Chapple, a senior research consultant at ADAS Rosemaund, admits that getting predictions wrong is easy and can make the difference between a reasonable return and a huge enterprise loss.
"We used to be able to forecast future prices with a fair degree of certainty, but sheep seasonal factors, marketing patterns, the export trade and consumer demand are now all less certain. The market is much more fickle than it once was, as people who bought store lambs for £40/head last year and sold them months later for £30 found out."
He believes that the old idea of taking the estimated end price and deducting anticipated fixed and variable costs to decide how much to pay for a store animal can still work with cattle, but has become a high risk strategy with lambs.
"The only advice I would dare offer to someone planning to buy store lambs, or to finish lambs that normally would be sold as stores, is to pay a lot of attention to market prices information in FARMERS WEEKLY, and to listen to what MLC and others are saying about prospects. I would also suggest talking the matter through with an independent consultant and putting some figures on paper."
Using larger framed lamb crosses capable of rapid weight gains increases marketing flexibility. If prices are good, feeding some concentrate can advance target sale date. Conversely, sale can often be delayed without risking over-fatness, he says.
Brothers Meurig and Mansel Raymond are typical of many store buyers deciding whether to buy or not this year. They regularly finish a large number of lambs on their Pembrokeshire dairy and arable units. Last year 1000 were bought in August for just under £30/head and were sold for roughly the same price before Christmas.
This years long dry spell means they have no spare grass to graze lambs, and they are worried about replacing silage buffer fed to dairy cows.
No store lambs will be bought early, but they could be in the market later.
"Stores will have to be very reasonably priced and we will need to be pretty confident about market prices in the new year to buy a large number," said Meurig Raymond.
But beef prospects should be better with many store buyers last autumn turning in profits. Gethin Havard, Llwynrhys Farm, Sennybridge, Powys – chairman of the 450-member Brecon and Radnor Suckled Calf Rearers Association – hopes that will push trade forward this year.
"Those who bought in 1998 on the worst trade we have seen in 20 years made money and I hope will be back to bid with more enthusiasm this year," says Mr Havard.
"The average price of our steers weighing around 420kg fell by £200/head over the last two seasons. Unless there is a recovery some disillusioned suckler herd operators are ready to quit."
He is convinced that the recovery in domestic beef consumption and the opening of the door for exports will consolidate the improvement in the price of prime beef cattle. Already he detects increased confidence among professional beef producers who are geared up to finish purchased cattle. *