The high milk price means more calves are being sent on the bobby truck this season, with slaughter numbers half-way through August 11%, or 80,000, ahead of last year across the country. This inevitably signals an equivalent drop in the number of beef cattle available for the 2023 season. The question is whether this is permanent or cyclical.
Conversations with calf rearers suggest fewer calves reared every year could be a longer-term trend unless the industry dynamics change in favour of rearing. There are several factors to consider. The most obvious one is the milk price, which on its own is a deterrent for many dairy farmers for whom it clearly makes economic sense not to retain the calf beyond four or five days old. Those that decide to retain them will ideally have a sale to a grazer or finisher contracted at a satisfactory price.
Dairy farmers who take a chance on rearing a few calves and selling them on the spot market have got a bit of a hiding over the past two years, especially if they hold them into November when there are too many available, forcing the price down. However, a lot of dairy farmers who would in past years have reared 30 or 40 calves have decided it does not make sense to use the milk, knowing it is more valuable in the vat.
Te Awamutu-based Kirkham Group’s main focus is on dairy farming, but calf rearing has been an important part of the business, which group director Debra Kirkham says “gets in your blood”.
A major deterrent is the lack of suitable staff to perform what is a very labour-intensive activity. It is also getting harder to secure contracts with beef farmers, so they halved this year’s spring calf numbers, which has worked out well for them.
As autumn calves attract greater demand and are not as numerous, they can generally be fully contracted. However, the company looks carefully every year at whether they should continue to rear calves, because as Kirkham says “the calf rearer is at the bottom of the pile and gets squeezed hardest”.
A standalone calf rearer would expect to pay $80-$100 for a well-marked 40kg calf and $250 for feed, assuming the whole milk powder price remains constant, plus labour and an allowance for deaths. A 100kg calf is worth $500 at present, but by November this could drop to $450. As can be seen, the margins are tight, unless there is a guaranteed contract price to fix the margin. Unfortunately, the Kirkham Group’s experience with securing contracts is increasingly typical across the industry.
The main issue for the red meat sector is its reliance on the dairy industry to provide a large proportion of its annual throughput and whether this presents an undue risk to its future viability. The current season’s slaughter figures, with six weeks of the season to go, show that prime steer and heifer make up 42% of the national kill, with the other 58% comprising cull cow and bull. While there will be a small percentage of prime cow and bull in the latter category, the vast majority will be from the dairy sector. In addition, a growing proportion of the prime kill will be from the tail-end of the dairy herd, covered by a beef bull, with whitefaced calves particularly sought-after.
The 2020 season saw prime make up only 38% of the total national cattle kill, so the increase this year may represent a carryover as a consequence of drought. It is unlikely to be the result of a sudden massive lift in the number of beef cattle on farms which, according to Beef + Lamb NZ’s stock numbers survey as at June 30, increased 2.5% over the previous year. Beef cows mated for the year actually declined slightly, so no major change there.
It may be that bull farmers are content to ride the swings and roundabouts of calf availability and the store stock market for their replacements, being prepared to buy and sell on the day, rather than contracting to buy bull calves from a rearer at a guaranteed cost. But contracting would encourage a continuing supply of an essential input to their farming model, which will become harder and more expensive to buy. Federated Farmers dairy section chair Chris Lewis makes the point that dairy rearers have also lost the live export market, which used to provide a valuable alternative. From his perspective, he used to rear a number of beef calves, but the present state of the market has given him cold feet.
Lewis believes B+LNZ, which earns levies from all dairy cattle slaughtered, should take the initiative and encourage beef farmers to commit to contracts with calf rearers, ensuring a continuation of the pipeline on which the red meat sector depends for an important proportion of its supply. While B+LNZ may not consider it their responsibility to make decisions on farming matters, it would surely be worth talking to farmers on both sides of this transaction to see what initiatives would result in a change in behaviour.
There have been campaigns over the years to drive the rearing of beef-cross calves from the tail of the dairy herd, but the success of such programmes depends on both parties being willing to make a contractual commitment. Unfortunately, it looks as though this is still being left to the vagaries of price and supply on the day which seems to be a wasted opportunity.
