HGP-Free Premium Markets
While premiums for HGP-free cattle can deliver good returns, it is worth remembering that these market premiums are not guaranteed, may be highly variable and short-lived. To be eligible to supply some of these markets requires producers to participate in audited on-farm quality assurance programs that can attract auditing fees and other administration costs. Furthermore, some of these markets require carcases to achieve a minimum MSA grading or processor specifications.
Using today’s beef prices, the premium required to offset the productivity benefits of implants ranges between 43 c/kg and 62 c/kg, depending on the age at implantation and finished weight. If only 70% of the cattle meet the specifications for a premium, the premiums required to offset the productivity benefits of HGPs increases to 54 c/kg to 72 c/kg (as per the table below).
The table below shows four implant scenarios demonstrating:
- the liveweight advantage of HGP-treated cattle if they are slaughtered at the same time as untreated cattle (A)
- the reduced number of days required for HGP-treated cattle to achieve the same target weight compared to untreated cattle (B)
- the premiums required to offset the productivity benefits provided by using HGPs (C)
- the premiums required to offset the productivity benefits provided by using HGPs if only 70% of cattle achieve target specifications (D)
Assumptions: Market price for HGP-free cattle = $5.60/kg HSCW and 52% dressing percentage. Figures assume a 15.8% liveweight gain advantage for Compudose implanted cattle. Market price for HGP-treated cattle = $5.20/kg HSCW and 52% dressing percentage. Market price for cattle that fail to meet market specifications = $4.70/kg HSCW. Premium required takes into consideration cost of implants throughout the growing period.
The graph below shows the price differential between prices for EU and Heavy Steers, demonstrating the fluctuations in premiums available for EU cattle. This graph was calculated using sale prices sourced from the MLA statistics database. Note that prior to 2015, Queensland EU prices were unavailable for comparison to Queensland Heavy Steer Price. Before this date, NSW EU prices were used for comparison to the Queensland Heavy Steer price and checks against EU Queensland grid prices made for consistency. EU prices between NSW and Queensland may have varied slightly.
The 55 c/kg break-even line represents the average premium from Table 1 required to offset the productivity benefits provided by using HGPs. The 45 c/kg break-even line represents the average premium required using pre-2015 cattle prices.
1. Figures assume a 15.8% liveweight gain advantage in cattle gaining 0.5 kg/day over 400 days, $3.17/kg liveweight and 100 implants per box. ^Image for display purposes only. Please read and follow the instructions on the approved Compudose 400 label.