Contracts a must for rearers

Poor spot prices this year mean calf rearers are unlikely to stay in the business without contracts next year.

01-12-2008 | Richard Rennie

Calf rearers who decided to gamble in the market without a contract this season will be licking their wounds in sale yards around the country.

Shane Scott of Central Livestock in Taupo says contract rearers will have fared relatively well this year. But spot prices have started off low, and show little sign of lifting any time soon through yards. Many weaner bulls are selling in the $300-310 range, down 10% on their opening values for last season.

"We had a good line of 100-110kg Friesian bulls sell from as low as $280 a head last week (early November), and you are on a hiding to nothing at prices that low."

He had a number of rearers around the Central North Island who had managed to procure contracts for $380 to $390 a head, a price that left "something reasonable" in it for the rearer.

The global credit crunch and poor profitability from last season was compounding the after effects of the drought this spring. The result was depressed prices farmers were prepared to pay for weaners.

A number of large operators in the Taupo region would normally be buying weaners at this time but had exhausted their overdraft limits just keeping stock fed through the drought and summer, leaving no funds to restock.

"The irony of it is that we have got more grass than we have had for a long time, but few stock around to eat it." Banks had put some clients under instructions to reduce those overdrafts and there was little to spare for re-stocking.

"A lot are killing cattle just to get rid of that overdraft."

Market Update data supports his view. North Island cattle kill is up 43% on the same period last year, and was being driven by increased steer and heifer slaughter.

Scott was adamant funding, or lack of it, was playing a role in properties being able to restock. Rabobank's predictions for world food supplies one of the few bright spots around for beef farmers.

Compounding this macro-economic effect was the climatic threat of another east coast-Hawke's Bay drought which was leaving farmers in those regions hesitant to get numbers back up going into summer.

Latest NIWA data reveals the Hawke's Bay average soil moisture levels have plant wilting point at four weeks drier than average already and decent rain before the end of November is essential.

Long time Waikato calf rearer Helen Pidduck says she had enjoyed a better year calf rearing than last season, receiving around $300 plus calf cost from her long-time clients for Friesian bull calves. She had been able to pick up good calves early on when the four day market was depressed for under $60/head. This had then been followed by a late surge that saw prices lift as high as $80/head.

Wanganui rearer Sarah Deroles believed she was the last remaining beef calf rearer in her district, with most others either dropping out or switching to contract heifer calf rearing.

"Anyone going into this industry would be a mug not to do so without a firm contract in their pocket, it is simply too much of a gamble now."

She had reared over 700 calves for Riverlands this season.

At $400 a head she was happy with that, but said it was a required amount to cover rearing costs and leave $100/head margin to make it worthwhile for rearers.

She had seen a strong surge in the market that pushed her later purchased calves up to $90/head, up from under $50/head early on.

With a lot of hill country farms in the Wanganui-Manawatu region still recovering from drought and flat country increasingly going into dairy support she did not see a huge market remaining for spot sales of bull calves.

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