Opinion Piece, Willem Wethmar, CEO Chalmar Beef

Dear Valued Customers,

When reflecting upon the last 6 months in the agricultural industry, the ancient Chinese curse “May you live in interesting times” comes to mind. Due to the severe drought many decisions had to be made by livestock farmers that will have implications on our industry for the next 5 years. Predicting what those implications are going to be and what is going to happen to meat prices is impossible as the variables for example rainfall, exchange rate, disposable income of consumers, disease (foot and mouth), international trade treaties etc. are diverse, unrelated and unpredictable.

 

Our core philosophy at Chalmar Beef, during good times and bad, is that we continue to produce a top quality product without compromising the end-user, as we remain cognisant of the fact that consumers are under immense pressure already, with rising living costs.

 

We want to  share with you some of our experiences gained during the drought and bring you information on the breeding cycles of cows to better understand the herd building phase we will have to go through as a country, once normal rainfall resumes. We also include an article written by Professor Johan Willemse from the University of the Orange Free State. He is a well-experienced agricultural economist and a thought-leader in agricultural circles.

 

Helping you understand how a herd is increased

 

COWS, COWS and more COWS

A farmer can naturally maintain or increase his breeding herd by retaining enough heifer calves each year instead of purchasing mature heifers, this however prolongs the process. It is imperative that there is sufficient food and water for the breeding cow to ensure she conceives and is able to feed her calve until it is weaned. The retained heifer calves will only produce offspring when they are 2 years old and there must be enough grazing for the heifer calves during this period. The above requires investment and commitment from the farmer, without the possibility of a guaranteed income.

 

During a drought, farmers are faced with the dilemma that they cannot maintain their herds and in order to effectively decrease their herds, they are forced to sell more calves and breeding cows which has a delayed knock-on effect on the consumer. It will take the farmer up to 5 years to rebuild the herd and during this period everybody will feel the impact of the drought as explained hereunder.

 

As a rule of thumb, most cows on the Highveld and eastern parts of the country calve between August and October (herein referred to as calves 2015). In a normal year, these cows will be put with the bulls (with their calves 2015 at foot) between November and January to conceive their next calf (herein referred to as 2016).

In a normal year calf 2015 will be weaned (taken from the cow) during March, April or May 2016 with an estimated weight of between 180 to 240 kg.

 

From this crop, (50 % of which are males and 50 % are females) all the males and about half the females will be sold for feeding. The best females (replacement heifers) will be kept back to replace cows that have become too old or infertile. These old cows are typically sold during the weaning time. In short : farmer John with 100 cows and calves will sell 50 male weaners, 25 female weaners, 25 old cows and keep 25 replacement heifers.

 

What has happened during this drought is that many farmers were forced to start selling their breeding cows in December 2015 as they had no food on their farms. A lot of the 2015 calves were weaned very early and at light weights. What was also noticeable was that the lots of calves offered were at a 50:50 male to female ratio meaning that the farmer kept no replacement heifers back. Some farmers who only had small amounts of food available put the cows with the bulls in December 2015 and January 2016, but capitulated in February 2016 and then sold the cows for slaughter.

 

The farmers who were lucky enough to have enough food on their farms to leave the cows with the bulls are unfortunately facing the next dilemma, poor conception rates. This is because of the extreme heat experienced during the breeding season and poor quality of the food available (supplementing the cow’s diet with purchased feed was just too expensive for many). This means that the 2016 calf crop due to be born between August and October this year, is going to be substantially smaller.

 

When this smaller 2016 calf crop is weaned in March – May 2017, a much larger proportion of the heifers will be kept back as replacements as the farmer has culled many of his breeding cows. Furthermore because the farmer already extensively culled his breeding cows, he may have no old cows to sell. In short: Farmer John sold 30 of his breeding cows in February 2016 therefore only putting 70 cows to the bull. He now has a calf crop of 70 calves (born in August 2016 for sale in March 2017 as weaners) with 35 males and 35 females.

Farmer John will sell the 30 males and only 5 females. He will keep 30 replacement heifers back and sell no cows as his farm is understocked. This will result in much less livestock entering the market in 2017.

 

This scenario should happen if our rainfall returns to normal and will lead to major downstream shortages within 6 months.

 

A heifer’s journey

 

When Farmer John weans his replacement heifers in March – May 2017 (they were born in August 2016) he will put them out to pasture until they are at least 15 months old (November 2017) at which stage he will put them with the bulls. After conception the heifer will gestate for 9 months before producing a calf.

The earliest farmer John’s replacement heifers will calf is therefore August 2018. These calves will only be ready to be weaned in March 2019 and only four to six months later, enter the beef value chain in and around September 2019. The rebuilding of the herd is important, but it takes a long time and in the short term can create a shortage of weaner calves entering the market.
 

Interesting times – leaving us with more questions than answers.

 

The cycle we describe above is a fact of nature and cannot be “sped up”. There are however many pitfalls that might hamper the herd rebuilding phase, and those include, but are not limited to the wildlife industry, economics and drought.

 

Wildlife industry

Livestock farmers are looking with disbelief at what is happening in the wildlife industry and asking themselves the question whether it is worth farming with cattle and sheep. The train of thought is that instead of looking after 500 cows and having 10 employees, he could rather look after 10 buffalos with 2 employees and make more profit than with livestock. So the question becomes – when it is time to rebuild herds? Is farmer John going to re-invest in cattle or is famer John going to gamble it all in the hysteria which the wildlife industry has become? Only time will tell.

 

Economics

If farmer John has been a marginal farmer in the past few years, he is going to have a problem keeping replacement heifers back. The reason is that he has bills to pay and therefore will not be able to keep many replacement heifers. He will therefore rebuild his herd over a much longer period meaning a poorer supply of calves for even longer.

 

Drought

The last “if” is a continued drought of which the consequences will be devastating.

It is therefore evident that the severe drought will have an impact on our industry for the next 5 years or even longer. Predicting what the impact will be and what is going to happen to meat prices is impossible, we can only hope for enough rain and favorable economic conditions going forward.

 

 

 

CHALMAR BEEF and the FUTURE

 

Chalmar Beef is celebrating its 47th year of doing business. Our founder built the company from the ground and with his passing in 2014 has left us in a strong position to face the future, however uncertain it may be. We have no investments in the Wildlife industry and in fact have invested in purchasing more land to expand our cattle operation.

 

EXCITING ANNOUNCEMENT

We are also very excited to use this opportunity to announce that we are setting up a state-of-the-art lamb breeding facility as well as a lamb feedlot. The lamb will be slaughtered at our abattoir and the lamb produced will only complement our quality beef.

 

The project is now in its development phase and will hopefully be scaled up over the next three years.

 

We are excited about our extension into the lamb sector and despite the impact of the drought, we will stay true to our philosophy and will continue to produce a top quality product.

 

 

Regards

Willem Wethmar

CEO