Calf rearing and “Market Forces”Tuesday, Jul 24, 2001
Each year, at this time, the small agricultural papers are full of the calf-rearing scene. The rearers use their interview or allotted space to talk down the potential price of four day old calves that are suitable for rearing, bemoaning the high milk powder prices and the low margins that they will have to endure. Within a few days those same rearers are out at the sales paying well above the figures they stated as their maximums, for the calves that have potential for beef.
This year the shock announcement by Richmond that it is going to pay $5.50 for larger calves really set the cat amongst the pigeons. Predictions that a ‘bobby battle’ will ensue, claims of there being no adult beef in two years time and instability occurring in the beef industry have already been broadcast. Those who normally try to talk the price back have found themselves scrambling for excuses. Taylor Preston has now given the value authority by coming in higher at $6.00.
Surely companies like Richmond and T.P. have done their homework and marketing predictions? They have vested interests in the future of the industry. Added to that the price they are offering for an 18.6Kg calf is only $102or $110, which is lower than last years auction price for a well-marked calf of that size. This year the market is more buoyant, so surely there is room for higher prices even though the expanded dairy industry will deliver more calves.
Haven’t farmers claimed their failing is that they are price takers and not price makers? This has to be a case of price making, albeit that some one has made the price for them. If the ensuing result is less beef reared then that plays further into the hands of the finisher.
So the calf does cost more, the weaned animal will cost more, the animal at slaughter will cost more and the super market will have to pay more for it and possibly reduce the margin it takes.Is it not the super market margin that the farmers have been so critical of in the past?
The real test for the strength of the industry will be the finisher’s ability to hold the animals if there is an attempt to drop the stock values. It’s a poker game that farmers have not previously played too well, but have now got a base on which to improve. The stakes (steaks?!) are getting higher so those with the steel will reap the rewards.
Contributed by associate editor David Clegg