Teagasc advice: Cattle farms can earn 20%-30% extra in 2015

Incomes on cattle finishing and single suckling farms are likely to increase by about 20% and 30% respectively, according to the mid-year assessment by Teagasc economists.
Teagasc advice: Cattle farms can earn 20%-30% extra in 2015

EU beef production in the first half of 2015 is ahead of production levels in the first half of 2014. Total beef production is 5% higher than over the same period in 2014.

This increase is largely due to a surge in cow slaughter in Q1, 2015 in a number of member states facing difficulties to remain within their milk quota.

With the ending of the milk quota system in April 2015, the rate of cow slaughter dropped, and the high rate of slaughter in Q1 is not expected to persist through the rest of 2015.

EU beef production for the year as a whole is forecast to increase modestly, by up to 1.4%, compared to 2014, on the back of growth in overall cow numbers that was observed in 2013.

Growth in EU imports of beef is not expected to add dramatically to the total supply of beef on the EU market.

Tight global beef markets, due to reduced levels of supply from countries such as the US and Brazil, and stable global demand for beef, have been reflected in high world price levels.

The weakening of the euro against the US dollar has also reduced the attractiveness of the EU as an export destination. As a result, EU imports of beef are forecast to be largely unchanged from their 2014 level.

Through 2015, better economic growth rates across the EU are expected to drive slow improvement in the demand for beef that began in 2014.

In 2014, the increase in total EU domestic use of beef was driven by lower prices, whereas in 2015, income growth is expected to be the driver of higher levels of consumption.

Despite increased beef supply, average EU finished young bull prices for the first half of 2015 have been marginally higher than in 2014.

In Ireland and the UK, prices are up significantly on the low levels experienced in 2014, with Irish and UK R3 steer prices 7% and 11% higher than in the 2014.

With the UK accounting for half of Irish beef exports, the strengthening of demand for Irish beef in the UK and the weakening of the euro against sterling have boosted Irish finished cattle prices, as well as prices of calves and weanlings.

Irish beef production, in contrast to that in the EU, is down from the high levels observed in 2014.

The different evolution of beef production in Ireland, as compared to the EU, reflects the different evolution of the Irish and EU breeding inventories in recent years.

The very high levels of throughput in 2014 reflected the growth in cow inventories (particularly dairy cow inventories) that began in 2010.

This year, the forecast 8% contraction in beef production reflects the lower levels of cow inventories in 2013 and 2014, as well as the high levels of calf and weanling exports in 2012, 2013 and 2014.

With stronger calf, weanling, store and finished cattle prices in 2015, Irish live cattle exports in 2015 have been significantly lower than in 2014.

For the year to date, calf exports are 15% lower and weanling exports more than 40% lower than in 2014.

Lower levels of live exports in 2015, and the increased calf crop as a result of growth in aggregate cow numbers, will in time be reflected in a recovery in Irish beef production in 2016 and 2017.

The direct costs of production on Irish cattle farms are dominated by purchased feed and pasture and forage costs (with the latter costs dominated by fertiliser and energy related prices).

For the year to date, grass availability on Irish cattle farms have been about average.

As a result, forage availability is not forecast to be a major driver of input expenditure on cattle farms in 2015. In 2015, Q1 aggregate sales of beef feed in Ireland are forecast be 11% lower than in Q1 2014.

With lower volumes of cattle being fed for slaughter in 2015, lower volumes of aggregate feed use are to be expected.

Whether the lower aggregate feed use is reflected in similarly lower average use per hectare is less likely.

For the year to date, cattle feed and energy prices have been lower than in 2014, while the fertiliser price has been marginally higher. Weaker energy prices are expected to be reflected in lower fertiliser prices over the rest of 2015.

Largely stable input volumes, and somewhat lower prices for most inputs in 2015, are forecast to deliver largely stable costs of production on Irish cattle farms.

Higher cattle prices and output value per hectare will be the key drivers of the forecast improvement in margins earned by Irish cattle farmers in 2015.

2014 was a particularly poor year for cattle finishers; in 2015, despite the higher prices that will be paid for cattle purchased-in, higher finished cattle prices should leave gross margins close to 20% higher than in 2014.

On cattle rearing farms, margins should also improve over the levels earned in 2014, due to significantly higher calf, weanling and finished cattle prices.

Gross margins on cattle rearing farms in 2015 are forecast to increase by up to 30% on those earned in 2014.

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