While U.S. beef producers are worried in the short term, they're mostly optimistic in the long-term about the future of the industry. The majority also feel federal subsidies of grain-based ethanol production are responsible for rising grain costs, and government subsidies and mandates on ethanol production should be eliminated.
In addition, the vast majority is making changes in their management and procurement strategies to reduce feed costs, and about 70% say they will maintain or reduce their herd size in 2008. In addition, 80% say they prefer Republican John McCain over Democrats Barack Obama and Hillary Clinton come November.
Those are some of the aggregated responses from 1,000 BEEF magazine readers responding to a 20-question electronic survey conducted in early May. The responses provide a snapshot into the thinking processes and actions of a cow-calf sector scrambling to deal with rising production and energy costs in the face of squeezed calf margins.
49.2% of respondents reported being less optimistic this year compared to last year regarding the “short-term future” — the next two years — of the U.S. beef industry. 37.1% reported “about the same” level of optimism, and 12.7% said they were “more optimistic.” See graph
Broken out by states, respondents in the far West (CA, OR, WA, UT, NV and HA) were the most optimistic overall (15.7%), while Southeast respondents (KY, GA, AR, FL, MS, TN, AL and LA) were the least optimistic (54.9%).
A similar question posed to BEEF readers in spring 2006 found 38.4% of respondents at that time claiming to be “less optimistic,” while 52.1% were “about the same” and 8.8% were “more optimistic.”
Regarding long-term prospects (five years and beyond), 45.7% of respondents in the May 2008 survey said their optimism level was “about the same” as last year. Meanwhile, 26.7% reported being more optimistic, and 26.6% said they were “less optimistic” than last year. See graph
The New England/middle Atlantic (NE/MAT) states (VA, NC, PA, SC, NY, WV and MD) led the geographic regions in optimism in the long-term (31.6%), while the Southeast was less optimistic (32.3%). See graph
In the 2006 survey, 51.4% reported their level of optimism as being “about the same,” while 21% were “more optimistic” and 26.9% were “less optimistic.”
In both the long-term and short-term (2008 survey), the most cited reason for growing pessimism was increased input costs, followed by availability of feed and forage, government regulations and oversight, and consumer demand. Industry consolidation/concentration and market access rounded out the list. See graph
“I believe animal agriculture is going to be a scapegoat for the environmental and ‘green’ movements,” wrote one. “Difficulty of younger farmers and ranchers to get started and be profitable,” said another. “Urbanization. The land is too valuable for ranching,” was another comment.
In this latest survey, 77.2% of respondents said their level of concern regarding bioterrorism and the U.S. beef industry was unchanged from last year, while 11.6% were “more concerned,” and 10.6% were “less concerned.” See graph
In the 2006 survey, 61.3% indicated their level of concern regarding bioterrorism and the U.S. beef industry was “about the same” as the previous year. 22% claimed to be “more concerned,” while 15.8% said they were “less concerned.”
However, perhaps owing to the recent media coverage precipitated by undercover videos of inhumane handling of “downer” dairy cows, 29.8% of respondents reported being “more concerned” than last year about domestic terrorism/animal activism. 64.1% reported “about the same” concern as last year, while 5.4% said they were “less concerned.”
Regarding increased consolidation and concentration in the feeding and beef packing sectors over the past year, 85% of respondents indicated being “somewhat concerned” to having a “major concern.”
50.4% of respondents believe federal subsidies of grain-based ethanol production are responsible for rising grain costs. A short supply relative to global grain demand was cited by 30.5%; and the weakness of the U.S. dollar was cited by 18.6% of respondents. See graph
85.6% of respondents believe biofuels have had “some impact” to “a major impact” on their operational expenses; and 48.6% favor the elimination of both the 51¢/gal. tax credit to ethanol blenders and the 54¢/gal. tariff on imported ethanol. See graph
Unsurprisingly, respondents from the Midwest states (KS, NE, MO, IA, IL, MN, WI, OH, MI and IN) are the most supportive of the current ethanol policy and the least likely region to cite federal subsidies of grain-based ethanol production as the main reason for rising grain costs.
87.6% of respondents are making changes in their management and procurement strategies in a move to reduce feed costs. Altering forage management was the most cited strategy (67.7%), followed by reducing cattle numbers (37.2%) and putting more weight on cattle before sale (36.8%). See graph
More far West respondents (76.1%) indicated they were altering forage management as a tactic, while Southeast respondents led the way in putting more pounds on cattle before sale (51.6%). Respondents from the Southeast and far West most cited herd reductions (43.5% and 43.7%, respectively).
NE/MAT respondents most cited pooling buying needs to secure volume discounts as a tactic (19.6%), and the West (CO, SD, MT, WY, ND, ID) and Midwest are most utilizing futures contracts to hedge (16.4% and 15.8%, respectively).
64.5% of respondents say they individually ID their animals using a system that doesn't include hot-iron brands; 57.5% say they've registered their livestock premises under an official state or tribal livestock ID program. See graph
62.2% of respondents maintained their herd size in the past year, while 36.8% expanded their numbers. Regarding expansion plans for 2008, 41.3% of respondents say they will stay the same size, while 14.1% plan to reduce their herd size by 1-10%, and 14.2% plan to reduce it by more than 10%. Another 21.5% say they will expand their herd by 1-10% this year, and 7.8% plan to expand by more than 10%.
Cattle persistently infected (PI) with bovine viral diarrhea (BVD) is attracting more producer attention. As it did in the 2006 survey, BVD-PI again topped the list of health concerns deserving of more government resources in surveillance, testing and prevention (61.8%), but that's a 15-point jump from the 2006 survey (46.8%). In descending order, other diseases of concern mentioned in the latest survey were: BSE, Johnes, brucellosis and tuberculosis.
Regarding free trade, 54.5% of respondents say their viewpoint on free trade is unchanged from last year. Meanwhile, 21.6% say they've grown “less in favor of free trade” in the past year, while almost an equal percentage (21.5%) say they've grown “more in favor of free trade.” See graph
Regarding the national presidential race, respondents vastly prefer the likely Republican nominee John McCain. In head-to-head match-ups, McCain bested Democrat Barack Obama by 80.3% to 14.8%, and his rival Hillary Clinton by 79.6% to 15.7%. See graph
When responses are separated by organizational affiliation, members of the National Cattlemen's Beef Association (NCBA) show a support level of McCain vs. Obama by 86.8% to 9.6%, and McCain vs. Clinton by 86.4% to 9.3%. Meanwhile, members of R-CALF and the U.S. Cattlemen's Association (R-CALF/USCA) preferred McCain over Obama by a margin of 79.1% to 16.5%, and McCain over Clinton by a margin of 76.5% to 18.3%.
NCBA members claimed to have grown more in favor of free trade (28.9% vs. 18.3%) than their R-CALF/USCA counterparts. Conversely, R-CALF/USCA respondents claimed to have grown less in favor of free trade over the past year (40.9%) than their NCBA counterparts (9.3%).
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