09 May, 2022

Managing costs and sectoral changes in Beef

Beef farmers across Ireland find themselves farming under changed circumstances from just a few short years ago.

Market requirements, CAP reforms, Environmental challenges, Brexit, Pandemic and War in Europe have all led to vast changes in how Irish beef farmers farm their land now and into the future.

The year 2021 ended largely on a positive note for the country’s 80,000+ beef and suckler farmers with rising prices throughout the year reflected in both the live and dead trade. While income supports remain hugely important to the sector, the finalisation of Ireland’s CAP strategic plan brings a new reality to the sector.

Environmental requirements under the CAP Strategic Plan 2023 – 2027 will mean a higher reliance on environmental payments for the sector, but the realisation of the need for food security across the EU means the European consumer is now turning their attention back towards the need for high quality, nutritious food, produced to the highest animal welfare, consumer health and environmental standards.

Ireland is well placed to take advantage of the high demands placed on food production; however, the early part of 2022 has brought about increased costs for the sector, not least the rising costs of fertiliser and feed which will place added pressure on what is already a low margin farming sector.

Costs and Sustainability

Ireland’s beef farming sector is majority family-owned farms, passed from generation to generation and not considered an intensive farming sector, especially when compared to beef finishing units in other parts of the world.

There are a substantial number of full-time profitable suckler and beef farms across the country. While many suckler and beef farms are run on a part time basis with off farm income used to supplement the household income, some of the smaller suckler herds consist of less than fifteen cows and specialise in producing weanlings for high end markets. The increased amount of beef calves from the dairy herd over the last number of years will see some farmers concentrate on dairy beef production. Summer grazing, winter finishing, autumn and spring calving patterns and a range of breed types means the industry is diverse and unique across farming sectors.

Whatever system is chosen, controlling costs, managing cashflow, generating a profit margin and ensuring the farm is viable for the next generation should remain key targets on all beef farms.

Cashflow on beef farms can be particularly challenging, especially on farms selling their produce towards the later end of the year, which coincides with income support receipts. This income is then required to carry the farm through the following year where costs such as fertiliser, slurry and silage making are incurred in the spring and summer months.

The rising cost of fertiliser compared to recent years means farmers in the sector will have to be more selective, more analytical and more cost driven than at any time in the past. Soil testing and action on results has risen up the priority list along with lime spreading and managing the level of phosphorus and potassium use on farm.

While the increased cost of producing grass for grazing or winter fodder is substantial, it must be borne in mind that grass is still our cheapest feed source and farmers should remain focused on getting high quality grazed grass and silage into the cattle’s diet thereby reducing the need for additional concentrate feed.

To maintain profitability in the sector, farmers will need to look at all options under the next CAP programme with the aim of maximising income for environmental actions. This income will be needed of offset the loss of payments elsewhere, which are likely to hit the beef sector hardest.

The EU’s Farm to Fork strategy aims to transition to a more sustainable food system that has a positive environmental impact, mitigates climate change, ensures food security, and preserves affordability of food while generating economic returns, among other aims.

Future Outlook

Beef and suckler farmers operating in a post Brexit, post-pandemic European Union with a new political environment on its doorstep, will see an increased EU concentration on the aim of food security. This can lead to a renewed optimism in the sector where new markets can be explored, and the promotion of Ireland’s green image and reputation for food production can benefit the sector.

Managing costs while maximising income from the farm will be key to the future of the beef and suckler sector. Farmers will adapt to the new requirements in the sector though the use of new technologies, a renewed focus on costs and animal performance to increase profitability and opportunities they hope the market will deliver.

The beef and suckler sector will continue to need support, both in terms of direct payments, targeted sectoral payments, reward for environmental actions, protection through regulations on unfair trading practices and a margin that covers the cost of production and rewards capital and labour invested.

Within this new landscape and support for the sector, farmers will need to be even more wary of costs of production and matters they can control within the farm gate.

Read the full report here.