Outlook 2017: Positive beef margins remain a challenge

Sterling’s recent weakness has been a key factor in pushing up beef prices following the Brexit vote.

The UK is only 75% self-sufficient in beef, and imports, mainly from Ireland, have become more expensive.

This has bolstered finished prices, offsetting some stringent, buyer-driven reductions in maximum carcass weights, says Andersons consultant Ben Burton.

“Well-managed businesses are generating positive margins. But the weaker pound has driven feed price rises, increasing pressure in an environment where a typical beef system continues to make negative returns, particularly upland systems.”

See also: How a discussion group could help your farm business

AHDB figures show that in 2014-15 a combined suckler/finishing unit lost £1.09/kg deadweight on average, he adds.

Business pointers 

  • Well managed businesses can create positive margins
  • Technical efficiency is key
  • Ensure cattle meet target market requirements
  • Favourable future EU/world trade deals are crucial

If the UK unilaterally removes import trade barriers ­– prime minister Theresa May has suggested the UK will lead the world in free trade – it will not only be Irish prices that affect the British beef price premium, but perhaps South American supplies as well, says Mr Burton.

“Unfortunately, the beef trade is unlikely to feature high up the UK’s political agenda and its importance as a sacrificial pawn when negotiating trade deals should not be underestimated.”

Red tape

In the short term, red tape such as NVZ regulations is unlikely to disappear after Brexit. It could even increase, with resultant administrative and production costs, says Mr Burton.

Technical efficiency remains key to profitability, and a healthy herd is a must to achieve it, he advises.

“Start with abattoir reports and talk to your vet – a small amount of time can save a significant amount of money.”

Diets must be monitored to ensure they are cost-effective, he adds. “Seek professional help – advisers use feed formulation software to optimise ration performance and cost.”

Producing cattle to target market requirements is key, says Mr Burton. “Talk to your buyer and review performance, and be prepared to act on it.”

Resources must be scrutinised, says Mr Burton. “Ensure resources are effectively used and that the business is not overresourced.”

Farmers Weekly says:

Sarah Alderton, livestock editor

  • Efficient beef production is still an issue in the UK, with only 53% of cattle hitting target specification.
  • Mortality and production losses due to disease are still affecting the bottom line. This, coupled with increasing pressure to minimise antibiotic use in stock, means it is more important than ever to focus on proactive cattle health management.
  • Food and forage efficiency is another key factor in sustaining a profitable beef system. Farmers are looking to get more production from grass, to keep costs to a minimum. 

Andersons Outlook

The Farmers Weekly outlook articles are based on Andersons Outlook 2017. Copies of the full publication can be downloaded from the Andersons website by clicking on ‘Publications & Events’. Alternatively, request a printed copy by telephoning 01664 503 200.

Andersons is running a series of seminars in the spring looking at the prospects for UK agriculture in greater detail.

3 March – RAF Club, Piccadilly, London

7 March – Harper Adams University, Newport, Shropshire

8 March – Westmorland, J36 Auction Centre, Kendal

9 March – Carfraemill Lodge Hotel, Lauder, Berwickshire

10 March – York Racecourse, York, North Yorkshire

14 March – Yew Lodge Hotel, Kegworth Leicestershire

15 March – Perth Racecourse, Perth

17 March – Newmarket Racecourse, Newmarket, Suffolk

21 March – East of England Showground, Peterborough, Cambridgeshire

22 March – Salisbury Racecourse, Salisbury, Wiltshire

23 March – Exeter Racecourse, Exeter, Devon

24 March – Royal Agricultural University, Cirencester, Gloucestershire

More information on the Andersons website