Trading cattle margins

Kerry Dwyer looks at prices for stock sold last year as an indicator and possibilities for trading gains in 2022.

Beef prices are at record high levels in New Zealand, so it is worth reviewing what trading margins have been available in the last year. To keep it simple we can look at several gross profits that could have been made, based on buying various types of cattle at Temuka auction market last April.

I am using these as indicative figures, buying and selling elsewhere in NZ will have had similar but different results.

Beef weaner steers

At the Temuka calf sale of April 7, 2021, there was a good range of beef-bred calves available. Let’s pick one pen of Angus-Hereford steer calves, weighing 233kg on the day, bought at $720/head which was about the average sale price at $3.09/kg liveweight (LW).

If these were grown at a high growth rate of 1.13kg LW gain/day they would weigh 630kg on March 24, 2022.

There were no comparable R2 year old steers sold at Temuka on March 21, 2022, but pricing them at $2.90/kg would be in the ballpark, putting them at $1825/head less costs.

The margin of $1105/head should have costs taken off to give a gross margin in economic terms, but note the margin equates to about 34c/kg drymatter (DM) less costs.

Alternatively these steers could have been sold directly for slaughter, if you could get slaughter space. In that case a slaughter weight of 345kg would be achievable. Current pricing of $5.80/kg carcaseweight (CW) would value them at $2000/head, to give a higher margin of $1280/head or 39c/kg DM, less costs.

Some processors have been paying premiums above their published schedules which would place the carcase price at higher than $5.80/kg.

If the steers were grown at a lower growth rate of 0.75kg LW/day they would have hit 495kg LW on March 24, 2022. Selling at Temuka sale would value them at $1435/head for a margin of $715/hd, equating to 26c/kg DM.

Beef weaner heifers

Buying beef-bred heifer calves at the same Temuka sale of April 7, 2021, is another option. The siblings to the steer example would have been 210kg Angus-Herefords at $2.40/kg LW or $505/head.

If these were grown at a high growth rate of 1.05kg/day they would have weighed 575kg by March 24, 2022.

Selling these back at the Temuka saleyards on March 21, 2022, you could have expected $2.65/kg liveweight, to gross $1520/head. That gives a margin of $1015/head which would equate to 34c/kg DM. If they had been sold direct to slaughter their value would have been $5.80/kg CW, the same as the steers, to give $1820/head, a margin of $1315/head or 42c/kg DM.

If the heifers had grown at a lower rate of 0.7kg/day they would have been 455kg LW by the end of March 2022 which would have put them on the knife edge between killable and store market option. Entering them in the store cattle sale would have priced them at about $2.45/kg LW, being $1120/head, a margin of $615/head equating to 24c/kg DM. Or putting them in the prime sale they might have been slightly higher at $2.60/kg to give an additional $70/head.

Friesian bull calves

The next option would have been to buy Friesian bull calves, again at Temuka, for a comparable time trade. To make them comparable with the steers, a 230kg bull calf in early April 2021 is worth maybe $2.20/kg LW or $505/head.

If that had been grown at a high growth rate of 1.13kg/day and sold to slaughter at the end of March 2022 it would have been 625kg LW, worth $1930/hd at base schedule price. That equates to a margin of $1425/head or 42c/kg DM.

Growing them at a lower rate of 0.75kg/day would give a 490kg LW bull which might just slip into the premium CW range. If sold for slaughter that would be worth $1400/head, for a margin of $895/hd, equating to 32c/kg DM. Sold as a store animal the pricing would be at about $2.50/kg LW, to give $1225/head, a margin of $720/head or 26c/kg DM.

R2 dairy heifers

We could look at other cattle trading options, buying R2 cattle instead of calves and selling them in spring for slaughter is the most common. As a variation on that, let’s look at buying empty dairy heifers and wintering them.

In the Temuka sale of March 29, 2021 there were numerous Friesian heifers sold in the boner pens. Average price for 410kg heifers was $1.58/kg or $645/head.

Assuming these were reasonably well-bred Friesians they could have been wintered, then sold seven months later at the end of October having grown at 0.9kg/day to achieve 600kg LW.

Selling direct to slaughter would have given a schedule price of $6/kg CW for these, to be $1980/head, a margin of $1335/head which would equate to about 50c/kg DM.

Selling them back at the Temuka sale of November 1, 2021, would have valued them at about $3/kg LW for a similar result at $1800/hd.

As Table 1 shows, there is variation in what was achieved last year depending on how well cattle were grown. I have not taken account of costs because they will vary with each option and with your own cost structure, work that out yourselves with what your finishing cattle have done in the same time frame.