More Beef Calves From the NZ Dairy Industry
- What is the problem?

The profitability of the NZ beef industry is under severe pressure. This is in part due to a lack of cattle available that are bred for their meat growing potential. Sixty-five percent of beef produced in NZ originates from dairy herds, largely in the form of Friesian bull beef, first cross dairy-beef cattle, or cull cows. Unfortunately many of the beef sires that are used by dairy farmers to generate that first-cross dairy-beef animal are not selected for their meat producing potential. They are used by the dairy farmers for follow-up mating after artificial insemination and are often selected on the basis of price or convenience. This makes common sense because there is very little incentive (economic or otherwise) for dairy farmers to behave differently.

However, the decisions dairy farmers make regarding the follow-up bulls they use over their herd have a significant effect on beef industry returns. A recent project undertaken by Ag Research (More Beef Calves from the Dairy Industry: Survey of Dairy, Calf Rearing and Beef Finishing Farmers - Alan McDermott and Lance Oliver, November 2004) on behalf of Meat and Wool NZ and Dairy Insight found that increasing the number of dairy cow progeny sired by beef bulls from 19% to 38% would result in a net benefit of $221 million to the beef industry.

Each of the above components operates autonomously and (at present) almost completely independent of other components either up or down the value chain from themselves. Market transactions take place between components in an 'arms length' fashion and often under spot market conditions. Lack of trust is a feature and the value chain operates inefficiently. The aforementioned $221 million is not captured.

To be more specific, dairy farmers purchase bulls or semen for 'follow-up' mating over the latter 30% of their herds. On average 82% of cows in a herd are artificially inseminated with dairy semen, but only 64% of the herd conceive to dairy semen. Therefore on average, 36% of the cows in herds are available for mating to beef sires. A significant opportunity exists to increase the use of easy-calving, good-quality beef semen in dairy herds over the low producing, low BW cows Sire selection decisions regarding production characteristics and meat producing potential are made independently and irrespective of the beef finisher, meat processor, or final consumer needs. The resulting progeny are also a small percentage of their total income. Convenience and risk are big issues for the dairy farmer. They perceive (in some cases wrongly) that using beef sires will cause greater calving difficulty, they perceive that the sale price of the resulting calves will not compensate for the added purchase cost of the sire and they perceive that using Jersey bulls is a low risk (for calving difficulty) option where they do not have to rely on breeding figures or claims provided by bull breeders.

The Hereford breed has programmes in place to offer the Dairy industry specific performance recorded low birthweight, ease of calving Hereford dairy beef type sires - resulting in a live calf, easily identifiable with its white face, and sought after by rearers/ finishers alike.

What incentive can be provided to influence the Dairy Farmer to act in a manner conducive to the profitability of the beef industry and who is in the best position to offer the incentive?

Survey work of McDermott and Oliver has identified that reducing mating costs, gaining a price premium on calf sales, ease of calving, and overall convenience are attractive incentives to dairy farmers and it appears that the finisher is in the best position to lead change to their industry. Rearers are not in a strong position to offer these incentives as they are predominantly margin takers. Therefore, the responsibilty falls on either beef finishers or meat processors. To date, processors have been unwilling to pay farmers on a yield- related basis. A revision of this pricing policy would undoubtedly result in a change in beef finisher behaviour, placing an even greater demand on the supply of dairy - beef cross cattle. Processors have also been reluctant to offer long-term price contracts for the supply of finished cattle.

This leaves finishers by default in the best position to co-ordinate and lead change within the industry through closer relationships with both dairy farmers and calf rearers. Finishers should consider how to identify good-quality beef sires, through the understanding of Estimated Breeding values (EBV's) and the recently introduced profit driven, Selection Indexes ($ Index) - NZ Herefords has a specific Dairy Beef Index, the only breed in NZ to do so. Sires identified should be well suited to dairy systems and provide those bulls (and/or dairy beef semen straws) to dairy farmers in return for a supply of the resulting beef-cross calves. These calves could be contract reared, removing margin uncertainty and cost for the rearers, before being finished by the beef finishers.

If Beef finishers are to accept this leadership and co-ordination role as proposed then they need access to:

- Data on the actual calf birth weights from different breed and under different management systems;

- Detailed analysis of the cost of mating for dairy farmers;

- Beef sires that are performance recorded for calving ease;

- and Pricing formulae and contractual arrangements that are fair and equitable to all participants in the dairy-beef chain.