Feeder calf sales across the country are now well underway and so far, they haven’t disappointed.
Changes to farming systems and farm sales over the past few years have put cattle numbers under pressure. With little surplus cash and the high cost of rearing calves, more rearers had exited the market rather than entered over the past several years.
The lack of store and finished cattle has finally caught up, and now the need to rebuild cattle numbers has been encouraged by strong returns and positive schedules. This has meant some beef rearers are back in the game this season, as recent margins suggest it could well be worth doing.
We are now nearly a month into the calf sales, and the peak of throughput won’t hit until mid-August. However, early sales show tallies are well ahead of last season. Tallies through North Island sales to August 1 are nearly 1200 ahead. These have been well received by the extra buyers, causing returns to lift.
The national bull kill is a strong focus as estimated slaughter statistics to July 6 show totals of 430,000-head, season to date. This is a 10% or 50,000-head drop on last season and 73,000-head behind the five-year average, easily making it the largest drop of all the cattle classes this season.
This has increased attention on the Friesian bull calf market. At the early calf sales, Friesian bull calves were trading for up to $300/head at best. These bull calves were likely snaffled up by rearers trying to do both early and late-season calves.
As the season has progressed, returns have softened slightly, with $150-$210/head more common. But this still trends about $30-$60/head higher year on year, depending on calf condition.
The positive outlook for beef still makes them look pretty good buying. While it is typical for beef schedules to rise from this point of the year, they are averaging 50-80c/kg above five-year averages across the country. This means there is a good margin to be made for beef finishers, on earlier brought cattle.
And it isn’t only the rearers and finishers making improved money; the current store market is running red-hot too. Record high slaughter prices have flowed on into the saleyards. Limited supply of R2 cattle means prices have soared and traditional R2 steers and bulls through the North Island are commonly trading for $1500-$1800, with up to $2000 paid in some cases.
Though these are record-high store prices, they are tracking fairly in line relative to schedule lifts. R1 cattle have often been $800-$1200, which is also very strong for this point of the year.
The strength isn’t only stemming from more market value in schedules. The procurement battle to source cattle is a key driver. Although calf tallies have lifted, and it would seem more will be reared this season, this still may not be enough to fulfill shortages over the coming years.
Combined, the 2022-23 national beef kill was about 10,000-head behind the five-year average and this was before the current true impacts of fewer calves being reared had hit. Season to July 6 shows that the current national cattle slaughter is 55,600-head behind last season, largely driven by fewer bulls being finished to date this season. Processors and agents don’t believe these are still sitting in paddocks.
According to StatsNZ, the latest figures show that the national breeding cow herd has been on the decline, dropping 7%, or 425,000-head, to the end of June 2023 since 2018. Therefore, it would be safe to assume that over the next year or two the cattle shortage will become more prominent as the effects of fewer calf rearers through 2022 and 2023 come to a head, as well as a decline in calves born.
More: This article was written by AgriHQ analyst Sara Hilhorst. Subscribe to AgriHQ reports here.
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