Beef producers split on expansion plans

Beef producers split on expansion plans

Expansion is well underway, but some beef producers are sitting tight.

Our focus in last week’s Industry At A Glance was on annual cow maintenance costs – specifically the long-term trend within the industry. Currently, the Livestock Marketing Information Center estimates that cow costs are running close to $900/head – a 225% increase in just 15 years. That increase has largely been covered by higher markets. However, with expansion occurring within the industry, bigger supplies will begin to pressure profitability at the cow-calf level.   

Expansion is most definitely underway. The industry witnessed that in earnest with USDA’s 2016 January 1 inventory marks. And this week’s data, derived from CattleFax’s annual cow-calf survey, underscores further intention to expand going forward. Nearly 60% of respondents indicated they expanded in 2015, and just over half intend to continue with those plans in 2016 going into 2017.

Survey respondents were mixed about their respective reasons for expansion: 42% indicated favorable profitability as the key reason for running more cows. However, 21% of survey participants realized increased grazing opportunities and thus needed to manage a larger inventory going forward. 

cowherd expansion

What are you plans for cowherd expansion in the year(s) to come? Do you foresee your operation being sufficiently profitable to reinvest back into the cowherd? How long do you perceive this expansion lasting? Will it be different this time around? 

Leave your thoughts in the comments section below. 

Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.

 

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