Are BEEF readers prophetic? Or are they just sharp operators who have been through enough ups and downs in the cattle market that their long-term vision has been honed to a fine edge?
Maybe it’s both. Whatever the case, BEEF’s annual State of the Industry survey shows cattle producers correctly anticipated that the second half of 2015 would be rough. What’s more, the 2016 BEEF Producer Optimism Index shows that BEEF readers think the second half of 2016 won’t be much better. For 2016, the aggregate short-term optimism index is on a straight-line downward trend, dropping from 101.5 last year to 60.7 this year.
Looking ahead, however, cattle producers who responded to our State of the Industry survey emailed in April saw reason to be slightly more optimistic for the long term. The long-term trend shows a different outlook, increasing from 88.4 last year to 92.9 in 2016.
Broken out by type of operation, the short-term optimism index for stocker-backgrounders took the biggest dip, while cattle feeders seemed to think that anything that happens has to be better than what they’ve been through recently.
Stocker-backgrounders took a 40-point drop, falling from 89.8 last year to 49.3 this year. Seedstock and cow-calf operators had similar outlooks, with seedstock producers registering a drop from 103 last year to 61.1 this year and cow-calf ranchers declining from 104.1 to 58.6. Cattle feeders, however, recorded only a small decline, going from 78.1 in 2015 to 73 this year (Figure 1).
That same trend held true when looking at the long-term optimism index broken out by type of operation. Stocker-backgrounders, while considerably more optimistic for the long haul, still see more black clouds than silver linings in the years ahead.
Their long-term optimism index fell from 101.1 last year to 92.8 this year. Seedstock and cow-calf operators held generally steady; seedstock producers went from 98.6 last year to 98.1 this year, while cow-calf ranchers increased slightly from 86.5 last year to 90.3 this year. Cattle feeder optimism, however, jumped from 78.1 last year to 104.7 this year (Figure 2).
Looking at the aggregate data for all respondents, most cattle producers were fairly evenly split when asked about their current level of optimism regarding the short term — within the next two years. Those who are less optimistic came in at 46.9%, while 45.7% say their level of optimism is about the same. Only 7.5% say they are more optimistic about the short term (Figure 3).
Those who are less optimistic for the short term indicate that consumer demand (58%), more government regulation and oversight (57.4%) and input costs (51.3%) are their top three concerns (Figure 4).
Those who are more optimistic point to supply-demand fundamentals (56.7%), available feed and forage (46.7%), and domestic demand (40%) as their top three reasons for seeing brighter days (Figure 5). Totals add up to more than 100% due to multiple responses.
For the long term, BEEF readers have a “steady as she goes” attitude, with 55.7% saying their current level of optimism for five years and beyond is about the same as last year. Those who are less optimistic make up 25.7% of respondents, while 18.6% are more optimistic (Figure 6).
Those who are less optimistic for the long term say that government regulations and oversight (69.4%), input costs (59.8%) and consumer demand (53.1%) are their top three concerns (Figure 7). Those who are more optimistic list international demand (60.3%), supply-demand fundamentals (59.6%) and domestic demand (55%) as their top three reasons for that outlook (Figure 8). Totals add up to more than 100% due to multiple responses.
BEEF readers who responded to our survey indicate they are strongly in expansion mode. When asked if they expanded their herd in 2015, 46.1% say yes, while 53.9% didn’t (Figure 9). And it appears the enthusiasm will carry forward this year, as 31.1% say they’ll expand by 1% to 10% in 2016-17 and 10.5% say they’ll expand by more than 10%. About the same number (41.9%) say they’ll stay the same, while 10% indicate they’ll cut back by 1% to 10%, and 6.4% say they’ll cut numbers by more than 10% (Figure 10).
Driven by drought and increased urban demand, water issues have come into critical focus for agriculture. When we asked readers how concerned they are about water availability in the next 10 to 20 years, many shared that it’s an issue that needs to be addressed.
On a scale of 1 to 5, with 1 being not concerned, the majority of respondents, at 36%, say they are somewhat concerned, and a total of 29.3% range up from there. However, a total of 34.7% say they aren’t concerned about water issues (Figure 11).
And finally, with the concern expressed by some respondents about the industry’s future, 86.1% say they are making changes in their management and procurement strategies to reduce input costs, while 13.9% say they aren’t (Figure 12).
And when it comes to cost, respondents are looking at multiple ways to cut. Of all the readers who responded, 58.4% are altering their forage management and 41.3% are putting more pounds on cattle before selling (Figure 13). Totals add up to more than 100% due to multiple responses.
Regarding the Trans-Pacific Partnership, it’s reasonable to think that BEEF readers support the effort. When asked how important international beef trade is to U.S. cattle prices, the vast majority of respondents say it is either important (42.4%) or essential (50.7%), while 6.2% say it’s somewhat important and only 0.7% say it is not at all important (Figure 14).
According to Scott Grau, Penton Agriculture’s senior research manager, beef producers clearly see the short term as a looming challenge. “This makes sense with the expansion of the cow herd negatively affecting prices and the uncertainties of other factors, such as the 2016 election and the effect of the Trans-Pacific Partnership. Readers are reacting to these challenges by taking action to manage their costs,” he says.
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