In the last edition of the Grazing Post, we had an article about beef cattle prices being on the rise in recent years. The price of cattle has continued to rise since the last newsletter. The graph on the right (updated weekly through the Beef Farmers of Ontario) shows the price of 600-699 pound heifers (which tend to be about 15 cents a lb more expensive than the 800 lbs heifers we purchase). We purchased at about week 20 last year for $1.75 per lb. Based on this chart, we are guessing that we will be paying about $2.20 per lb for our heifers this year.
The unfortunate part about this cattle price increase is that we too need to increase our prices this year. Last year, we purchased 40 yearling heifers, averaging 800 lbs at $1.75 per lbs for a total of $56,000.
This year we will be purchasing 40 yearling heifers, averaging 800 lbs at $2.20 per lbs for a total of $70400. That is an increase of $14,400. We sell between 310 and 320 lbs of beef per animal for a total of between 12,400 and 12,800 lbs. If all of our other costs remain the same, we would have to increase our prices by $1.13 to $1.16 per pound to cover the increased price of these yearlings. As such we are raising our prices by $1.15 per pound this year, from $8.75 per pound to $9.90 per pound. We realize that this is a 13% increase over last year, but unfortunately we have very little choice. We hope you understand.
Our pricing formula for 2015 works as such: we charge $9.90 per pound of beef to cover our cost of production and wages and then $10 per delivery to cover the cost of packaging, storing, handling and delivery. For example, the half share costs 40 lbs X $9.90/lb + 4 deliveries X $10/delivery = $396 + $40 = $436.
If all goes well, this is the last year that we will be purchasing stockers. The calves that were born on the farm this past summer will be ready to be butchered in the fall of 2016. Our goal is still to peg our annual price increases to Canada’s annual inflation rate.