In last year’s state-of-the-industry issue, the message was basically this: “If you can hang on through 2009, there are likely better markets beyond.” Well, a year has passed and the current outlook certainly seems to support that June 2009 characterization.
For those successful in treading water in 2009, the fundamentals look outstanding. Fed cattle that were selling at $80/cwt. in December sprang past $100 a few months later, with calf prices seeing a similar 20-25% jump. Supplies are down, demand is up and all sectors are exhibiting buoyancy about the outlook.
That mood is certainly borne out in the results of an exclusive BEEF survey on the state of the industry completed in May. Compared to last year, 61.6% of 1,029 respondents to an electronic survey reported being more optimistic about the short-term future of the U.S. beef industry. Only 5.7% were less optimistic. And 37.5% said they were more optimistic this year than last about the long-term future – five years and beyond – of the U.S. beef industry.
Today’s overall mood is up considerably from 2008 when BEEF conducted its last state-of-the-industry survey. At that time, corn was trading at almost $6/bu., with Kansas City wheat surpassing $8, and southern Iowa soybeans almost at $13. Crude oil prices had blown past $125/barrel, and gasoline was retailing for $3.72/gal., with diesel 60¢ over that.
Readers responding to that poll were understandably downcast, with 49.2% citing themselves as less optimistic in their view of the industry’s short-term future (the next two years) compared to the previous year, and only 12.7% were more optimistic. Respondents in the 2008 survey, however, were more positive about the industry’s long-term future (five years and beyond), as 26.7% characterized themselves as more optimistic and only 26.6% said they were less optimistic.
In early May, 1,029 BEEF readers out of 18,372 emailed questionnaires responded to our state-of-the-industry survey (effective response rate of 5.6%). The responses provide a snapshot into the thinking processes and actions of a U.S. beef production sector reacting to an improving, but still volatile, business environment.
Of the 61.6% respondents (Figure 1) who claimed to be more optimistic about the industry’s short-term future (within the next two years), they cited the main reasons for their optimism being supply/demand fundamentals (79.7%), increasing international demand (42.9%) and available feed and forage (38.6%).
For those feeling less optimistic about the industry’s short-term future, their main concern was government regulations and oversight (81.4%), followed by increased input costs (71.2%), consumer demand (49.2%) and credit availability/equity requirements (35.6%).
Taking a more long-term perspective – five years and beyond – those respondents feeling more optimistic (Figure 2) cited increasing international demand (74.9%), followed by stabilizing domestic demand (58.5%), and available feed and forage (32.1%). Among those feeling less optimistic, the most cited factors were government regulations and oversight (84.8%), increased input costs (64.1%) and consumer demand (40.2%).
Looking to the future, 88.5% of respondents reported they are making changes in their management and procurement strategies to reduce input costs; 10.8% said they are not planning such changes.
When asked to select from a list of the risk-management tools they employed in their operations last year (Figure 3), 27.3% combined to name the use of futures and options, while 20.2% named forward contracting of calves, 17.5% named forward contracting of inputs, and 58.9% selected no strategies from the list.
When asked which, if any, of those same strategies they planned to employ in the 2010/11 production period, 32.5% named futures and options; 25.3% said forward contracting of calves; and 20.8% said forward contracting of inputs; and 50.9% of respondents selected none of the strategies listed.
Altering forage management (56.9%) was the top selection of respondents when they were asked to select the strategies they were using to decrease feed costs in the short term (Figure 4). Second (39.1%) was putting more pounds on cattle before selling them, while reducing cattle numbers was third at 20.5%. Using futures contracts to hedge garnered 9.1%, and 15.6% selected “none of these strategies.”
When asked whether they individually identify (not including hot-iron brands) the animals in their operation, 65.9% responded yes, while 33.2% said no (Figure 5). Of all the respondents, 57.3% said they had registered their livestock premises under an official state or tribal livestock ID program; 41.4% said they had not (Figure 6).
The majority of respondents (54.7%) said they did not manage any animals in the past 12 months for eligibility into value-added programs (Figure 7), while 44.3% said they did. Of those who did manage animals with a goal of making them eligible for value-added markets, 71.3% reported having received a premium for those animals; 26.8% said they did not.
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Of all the respondents, 44.2% said they intended to retain ownership on their 2010 calves post-weaning through the stocker phase, while 41.6% said they did not. Meanwhile, 22.4% of respondents said they plan to retain ownership of their 2010 calves post-weaning through the feedlot phase; 54.9% did not. Of those responding yes, only 14.8% said the decision represented a change in the management of their calf crop over the previous year.
When asked if they had expanded their herd in 2009, almost 39% of respondents said they had added numbers, while 60% had not. Regarding 2010/11, 41.6% of respondents reported their intention to maintain the same herd size (Figure 8), while 30.6% said they intended to expand by 1-10%, and 12.1% intended to expand their herd size more than 10%. Meanwhile, 8.9% of respondents said they intended to reduce their herd size by 1-10% and 5.8% intended to reduce their herd size by more than 10%.
On policy issues, 98.5% of respondents believe that international beef trade is either important or essential to U.S. cattle prices (Figure 9): 50.6% said such trade is essential, while 40.6% termed it important, and 7.3% said it was somewhat important. Only 0.4% said it was not at all important.
When asked if their viewpoint regarding free trade (global/international) had changed in the past year (Figure 10), 21.2% said they had grown more in favor of free trade, while 14.1% said they were now less in favor of free trade. The biggest majority – 62.2% – said their attitude toward free trade had remained the same.
In addition, 74.1% of respondents believe that the U.S. country-of-origin-labeling (COOL) law has not benefited their operation (Figure 11), while 23.4% said COOL has benefited their operation.
When quizzed on their attitude toward biofuels (Figure 12), 74.2% of respondents said such programs had some-to-a-major impact on their operational expenses. When asked what the government policy toward biofuels should be (Figure 13), 37.3% favored elimination of both the blender’s credit and the tariff on imported ethanol, while 37.2% favored leaving it as it is. Another 15.3% wanted the blender’s credit eliminated, while 5.7% favored eliminating the tariff on imported ethanol.
With the current renewable fuels standard calling for the production of 36 billion gals. by 2022 (Figure 14), 65.6% of respondents favored letting the market dictate the level of production. Another 16.3% favored maintaining that production level, while 7.2% favored reducing it and 8.9% said the mandated level should be raised.
When asked to characterize their level of concern this year over last year regarding consolidation and concentration in the feedlot and beef packing sectors (Figure 15), a total of 82.3% they were either somewhat concerned or it was a major concern to them.
Respondents also indicated increased concern this year over last in regard to activists (Figure 16). A total of 53.7% of respondents said they were more concerned, compared to last year, regarding domestic terrorism/animal activism; 43.1% said their concern level was about the same; and 2.4% were less concerned. Regarding bioterrorism, only 22.9% of respondents reported being more concerned this year over last, while 71.2% said their concern was unchanged from the previous year.
Respondents are also getting involved (Figure 17); 51.1% of respondents indicated that in the past year they had refuted incorrect or misleading information about U.S. beef production disseminated by activist groups. This included contacting their elected officials (43.9%), making a presentation before a group (33.7%), responding via social media such as Twitter, Facebook, MySpace, etc. (31%), and writing a letter to the editor (16.3%).
In addition, 57.3% of respondents said they had made direct contact in the past year with a state or federal elected official via telephone, letter, email or social media (Figure 18).
Among the cattle diseases of most importance to producers (and toward which USDA and state government should devote more resources for surveillance, testing and prevention), cattle persistently infected with bovine viral diarrhea ranked first at 56.9%, while brucellosis was second at 37.8%. Ranked third was trichomoniasis at 33.4% and BSE at 32.6% and tuberculosis at 30%. Johnes was listed by 28.9% of respondents.
To see all the survey results, go to beefmagazine.com.
Click here to view the graphs and charts in mentioned in the story
Rick Click and save as to download the full statistics report in a Microsoft Word file.