LMC: In Spec Cattle Production Report Shows Effects of Cereals24 April 2013
UK - Despite the bonus incentive of 8 p/kg, fewer steers and heifers are coming in under 30 months of age meaning further problems with a 10p/kg penalty, according to Livestock and Meat Commission which says cost and quality of cereals is having an effect on finishing.
The latest monthly review of the NI slaughter mix has indicted that many NI cattle finishers are presenting cattle outside specification at point of slaughter. This is despite the introduction of the 8p/kg bonus by the plants for in spec steers and heifers back in 2011 in an attempt to encourage a more uniform slaughter mix.
The current specification for the 8p/kg bonus is outlined in Table 1. The difficult weather conditions
experienced during 2012 created a number of production challenges for beef farmers.
The poor grass growth recorded for much of the summer had a negative effect on animal performance and also resulted in poorer quality silage being produced to carry stock through the winter months.
These issues alongside the increasing cost of cereals, and the reduced quality of these cereals, may have had some role to play in the difficulties producers have had in getting cattle within the desired specification at point of slaughter this spring. During March 2013 just 34.7 per cent of price reported steers and heifers slaughtered fulfilled all of the criteria for the in spec bonus.
The current specification on age for steers and heifers is under 30 months across the plants. While the largest majority of steers and heifers are slaughtered under 30 months of age in NI there has however been a decline year on year.
During March 2013 85 per cent of steers and heifers slaughtered were under the age limit compared to 89 per cent in March 2012. Young bulls make up an important part of the NI prime kill and accounted for 19.4 per cent of the total prime kill during March 2013.
The current age specification for young bulls from the plants is under 16 months of age but during March 2013 only 39 per cent of the young bull kill met this criterion. It is however an improvement on March 2012 when 35 per cent of the young bull kill were under 16 months.
A further 52 per cent of the young bulls slaughtered during March 2013 were within the 16-24 month age bracket compared to 54 per cent in March 2012.
Penalties for Age
The plants currently have in place a 10p/kg penalty for steers and heifers over 30 months of age and in theory these overage stock would also miss out on the 8p/kg bonus which would take the total penalty to 18p/kg. The actual differential between over and under 30 month R3 grade steers and heifers, that were otherwise in spec, during March 2013 was about 10p/kg.
Meanwhile the price penalty quoted by the plants for young bulls which are over 16 months is 10p/kg. This was reflected in the slaughter report as the actual difference in the price paid for R3 grade over and under 16 month young bulls for the month of March was 10p/kg.
As outlined in Table 1 the preferred carcase weight range for steers and heifers is 280-380kg. Table 2 outlines the proportion of the steer and heifer kill in March 2012 and March 2013 that falls within a range of weight categories, including this desired range.
In March 2013 65.2 per cent of steers and heifers slaughtered fell within the desired 280-380kg, an increase from the 63.6 per cent in March 2012. The number of steer and heifer carcases in the 380-420 weight range declined by 2.6 percentage points to account for 13.4 per cent of the kill in March 2013.
Meanwhile the proportion of carcases in the 420kg+ weight range declined by 1.9 percentage points to account for 5.7 per cent of the steer and heifer kill during March 2013. The proportion of
carcases less than 280kg during March 2013 accounted for 15.7 per cent of the kill, up from 12.8 per cent of carcases in March 2012.
Penalties for weight
At present there are penalties in place across the plants for cattle with carcase weights outside the required specification but how strictly these are applied is closely linked to the supply of cattle and the particular specifications a plant is meeting.
For example an analysis of the latest slaughter mix report indicates that R3 grade steer and heifer carcases in the 420kg+ weight range were paid on average 12.3p/kg less than animals within the 280-380kg weight range during March 2013. If penalties were being fully applied these animals would have been paid at 18p/kg less.
Meanwhile carcases within the 260- 280kg weight range are outside the current specification for the 8p/kg bonus and the price paid should therefore be around 8p/kg behind the in spec price.
However premiums paid for lighter carcases to fulfill particular orders in some plants, e.g. for Aberdeen Angus cattle, resulted in the average price paid for R3 grade 260-280kg carcases being 1.4p/kg higher than the price paid for R3 carcases within the 280-380kg weight range.
An analysis of price reporting has indicated that 77.5 per cent of steers and heifers slaughtered during March 2013 fulfilled the conformation specification for the in spec bonus. In addition to this 79.0 per cent of the steers and heifers slaughtered were within the desired range for fat cover.
However only 58.3 per cent of steers and heifers slaughtered fulfilled the requirements for both conformation and fat class. This indicates that some producers may be experiencing difficulty in getting animals to meet the specification for both.
While this may be a knock on effect of the difficult production conditions over the last twelve months producers should ensure that they make full use of the advice services available to them eg
Application of pricing structure
If processors want producers to supply cattle within a required specification it is important that they give producers the appropriate market signals to encourage them to do so. In theory this could be achieved through a tighter application of the existing bonus and penalty system but this is difficult to implement due to issues around supply and demand.
While this analysis of the slaughter mix is very useful in identifying to what degree producers are meeting therequired specifications it is important to remember that there are potential markets for cattle outside thisspecification.
Some producers have also indicated that the type of cattle they need to produce to leave a margin at farm level are not necessarily within the desired specification of the processor.
The quotes from the plants for prime cattle, the pricing grid and the associated penalties and bonuses are a guide to potential returns for cattle which is subject to negotiation.
The prices actually paid to producers are generally driven by factors around supply and demand and is also
influenced by the strength of the relationship between the producer and the processor.