Better marketing might be way to maintain profit
Joining other producers to set up a marketing group is the key to maintaining beef margins, believes one Herefordshire producer. Emma Penny reports
FINISHING home-bred cattle on a Herefordshire unit costs 140p/kg liveweight gain.
With 40p/kg supplied via subsidies, an end price of £1/kg is required to break even. But with average prices of about 97p/kg last year making any margin is questionable, if not impossible.
That is the scenario facing most UK producers, and one that has vexed Stuart Hutchings, who manages 550ha (1360 acres) at Gatley Farms, Leinthall Earls, Leominster.
Most of the Charolais cross bulls and heifers out of the 200 crossbred cows are finished on-farm, with a few sold as stores. Attempting to make a margin on finished cattle has led Mr Hutchings to examine costs and take action to help prop up returns (see table).
"We finish bulls at 15 months old and 630kg off silage and barley, selling direct to the abattoir. In 1995, bulls averaged £830 a head. Today, the best average we could hope for is 360kg deadweight at about 172p/kg, a total value of £620.
"Heifers are finished at 480kg and 20 months old; at 290kg deadweight and sold at 165p/kg they come to £480. We sold some as 13-month-old stores last year, but the poor trade means we wont be doing that this year."
Like most beef producers, Mr Hutchings is looking to cut costs, but there are few answers. "I cant see any way of improving physical performance. We have already increased cattle numbers and liveweight gains averaging 1.3kg a head a day are very good.
"There is little option of reducing costs substantially. I could change to using waste from food manufacturing rather than home-grown cereals and bought-in maize gluten, but I do not want to do that. Labour is a major overhead cost but I cannot see how we could do with less and maintain beef and lamb production levels. Also, if we cut labour, other costs would probably increase."
But close examination of costs meant Mr Hutchings started to look at how much of the cattles finished value he could retain. That, and discussions with other producers in the area and the local abattoir, led to the Marches Quality Meat, a producer group aimed at selling beef and lamb to independent butchers and retailers who are prepared to pay for quality, service and complete traceability.
Funded under the EUs Objective 5b scheme, the group will receive assistance with 40% of marketing costs for the first four years, with the group providing 60% of costs.
"We are trying to sell the image of suckler bred beef and lamb from upland permanent pasture on the Welsh Marches. We are targeting independent butchers and caterers who want good service and quality meat, and are being proactive."
Butchers buying from the group can also benefit from complete traceability, as it meets all requirements for MAFFs beef labelling scheme. "This is a strong selling point, and we are just disappointed that the schemes introduction has been delayed as we were set up to meet the Apr 1 start date."
Supplying Marches Quality Meat means that cattle, particularly heifers, from Gatley Farms can be finished at slightly heavier weights, allowing full exploitation of good growth rates and slaughter at the most economic carcass weights. Killing cattle at a local abattoir also reduces haulage costs.
"Pricing is done on the day, based on converting MLC liveweight prices, killing out percentage and a premium."
Although reticent to specify the premium available, Mr Hutchings thinks the combination of selling at heavier weights, reduced haulage costs and better prices should be worth about £6000 a year across his 200 finished cattle.
"We are trying to increase finished cattle values, and moving away from selling a commodity to being more proactive with a retail-led scheme. We should also benefit from good feedback from our customers.
"We are selling about 20 cattle and 200 lambs a week, but hope to double that by October, a year since we set up. We are looking for more producers, and are also looking at larger retailers who will sell our labelled, differentiated product at a premium, giving producers a better return," he says. *
Stuart Hutchings… Adding value to cattle through improved marketing.
• Producer run.
• Objective 5b funding.
• Aim to increase returns.
Return from 200 suckler cows on 150ha (370 acres)
Year 1995 1996 1997
Gross margin (£) 106,110 96,310 82,400
Fixed costs (£) 79,750 82,650 87,000
Margin (£) 26,360 13,660 -4,600
Capital employed (£) 275,500 275,500 285,500