Rising input costs, higher corn, and uncertain economic times have most cow-calf producers cautious. Understandably so, but those who listened to Randy Blach of Cattle-Fax at the National Angus Conference felt a whole lot better about life.
Blach says the cow-calf sector could have as profitable of a 3-4 years as at any time in history. If you want to read that last statement a couple of times just to enjoy it, do so.
With cow-inventory numbers at an all-time low, and global beef demand gaining momentum, things are looking up. Domestic demand growth is expected to remain slow but should be positive, as the economy seems to have weathered the worst.
Beef demand was up 5% last year, and the combination of tight supply and growing demand should drive prices higher, says Blach, who calls for fed prices to increase $3-$4/cwt. We haven’t spent much time talking about fed cattle over $100/cwt. since fall 2003 when BSE hit and our export markets collapsed.
Even with increased demand, improved genetics has made our national herd more efficient, leading to the need for fewer cows. But Blach predicts we’ll eventually need 600,000 to 700,000 more cows to keep up with expected demand growth.
He certainly didn’t guarantee record calf prices in the next 3-4 years, but said demand projections don’t preclude those types of price levels. Meanwhile, record cow prices are almost assured, while – judging from the fall bull sales – bulls are also likely to experience record highs sooner rather than later.
It’s simply a very exciting time to be in the cattle business. Sure, there are risks, and corn is going to remain at the top of that list. We’ve rationalized our industry by shrinking production to come in line with higher corn prices, but price risk to the upside remains as we’ve had record crop after record crop following the subsidizing of ethanol.
Blach also mentioned how important it is to comment on the proposed GIPSA rules, which he says places genetic programs and advances at risk. We also must continue to expand market access. As an example, he says that over the last six years, the reduction in exports had resulted in a loss of value equal to about $70-$75/head. My simple cowboy math tells me 25 million head times six years is 150 million head; multiply that by $70/head and that’s more than $11 billion!
Even if you figure that packers would keep $5, and the feeding industry $15/head, of that total, that still means that BSE and our inability to regain access and those markets have cost the U.S. cow-calf segment more than $7 billion.