29 March 1996

Finishers margins turn for the worse

By Philip Clarke

CATTLE finishers, who 10 days ago were anticipating a year of reasonable profits, now face financial ruin.

With export markets shut and abattoirs at a standstill, initial reaction has been to hold animals back. But cattle that are ready to go cannot be kept on farms indefinitely and will soon have to make their uncertain way to market.

Even if intervention is available, this will only lend support at about 95p/kg liveweight, say economists, and possibly lower as there is no minimum price at which tenders may be accepted.

But even on the basis of this weeks values – 99p/kg for medium weight steers – only the most efficient stand any chance of staying in profit.

For an 18-month finishing system total output, including a full beef special premium of £93/head, would come to £588 for a 500kg beast.

From this is deducted the cost of the calf and variable costs – principally feed and vet bills – valued at £199 and £209 respectively, according to MLC Beefplan results. This leaves a gross margin of £180 a cow.

From this is deducted overheads, mainly labour, buildings and depreciation. NFU economists put these at about £230 a cow for the typical 18-month system, leaving an average producer facing a £50 loss on every cow sold. This could be worse still if feed costs rise or if beef special premium is scaled back again.

The same calculation just 10 days ago would have left a profit of £55 a cow.

Clearly these are just average figures and variations in overheads will be considerable. But faced with a £100 a head drop in finished cattle prices, most other finishing systems will be in a loss-making situation even before fixed costs are deducted, according to the MLC Beefplan costings. &#42