Optimism about U.S. beef industry prospects in the short and long term remains robust, but just a step off the pace of 2010 and 2011, according to the latest BEEF magazine reader survey. The producer optimism index (POI), as measured by the annual survey of BEEF magazine readers, hit its apex in 2010, rising dramatically from the previous survey in 2008. The POI moderated slightly lower from that lofty perch in 2011 and looks essentially flat in 2012.
“The results reveal that short-term optimism among readers continues to run high. This optimism is driven by current favorable supply/demand fundamentals and the current high prices for both calves and feeder cattle,” summarizes BEEF Research Manager Scott Grau.
“Meanwhile, long-term optimism continues to be positive, but more restrained. While supply/demand fundamentals and international demand are positive influences, the overall mood seems tempered by the effect of increased input costs and concern over growing government regulation and oversight,” he adds.
The email survey was sent to 24,000 BEEF readers regarding their industry attitudes and management actions. A total of 1,200 usable surveys were returned for an effective response rate of 4.8%.
While survey respondents remain optimistic about industry prospects, a majority report a more dismal perception of the general economy’s direction. When asked whether the U.S. is headed in the right direction, 55.1% of respondents said no, while 24% said yes. Another 20.9% didn’t know (Figure 10).
And it appears that displeasure will translate into anti-incumbent fervor in the fall elections (Figure 11). When asked which party they were most likely to vote for in 2012, 74.8% said Republican, while 7.8% indicated Democrat. Another 13.2% were undecided, while 4.2% said neither.
Overall optimism retained
Of all respondents, 50.3% reported themselves as being more optimistic regarding the short-term future (next two years) of the U.S. beef industry. Another 43.4% said their level of optimism was the same as last year, and only 6.3% were less optimistic.
Among the respondents expressing more optimism of the short term (Figure 1), supply/demand fundamentals topped the list of positives, followed by increasing international demand, available feed and forage, and stabilizing domestic demand.
Topping the rationale for those citing less optimism about the short term (Figure 2) were increased input costs, and government regulations and oversight. Consumer demand was third, followed by availability of feed and forage, and credit availability/equity requirements.
When asked of their current level of optimism regarding the long-term future (five years and beyond) of the beef business, the majority (55.8%) said it was about the same as last year. Meanwhile, 33.8% said they were more optimistic, and 13.8% said they were less optimistic.
Of those more optimistic about the long-term (Figure 3), the most cited reasons were supply/demand fundamentals and increasing international demand. Stabilizing domestic demand was a very distant third.
Those calling themselves less optimistic about the long term (Figure 4) cited government regulations/oversight, increased input costs and consumer demand as the main reasons
When queried on the importance of the international beef trade to U.S. cattle prices, respondents reported a slight increase in appreciation over last year. In the 2011 survey, 61.1% considered international beef trade essential, which moved to 64.5% in the 2012 survey.
In both the 2011 and 2012 surveys, respondents were asked to rank a list of cattle diseases as deserving of more public resources for surveillance, testing and prevention. In the 2011 survey, cattle persistently infected with BVD (BVD-PI) topped the list, followed by BSE, Johnes, brucellosis, bovine tuberculosis and trichomoniasis. In the 2012 survey, BVD-PI retained the top spot, trichomoniasis jumped to second, followed by brucellosis, BSE, Johnes and bovine tuberculosis.
When asked what strategies they were employing to decrease feed costs in the short term (Figure 5), 62.9% respondents indicated they are relying on altering their forage management, followed by putting more pounds on cattle before selling them (37%), reducing cattle numbers (22.8%) and pooling buying needs with others to secure volume discounts (11.8%); 7.6% say they are using futures contracts to hedge their feed costs.
In discussing their marketing plans for 2012 calves (Figure 6), 43.8% of respondents indicate they plan to market their calves the same time as last year, while around 13%, respectively, say they plan to market them sooner than last year, or later than last year. Another 30.4% hadn’t yet settled on a marketing strategy.
Meanwhile, expansion is still very much in the minds of BEEF readers, as the major share of respondents (44.1%) report they plan to expand herd size in 2012-13 (Figure 9). Of these, 32.5% plan a 1-10% expansion, while 11.6% intend to expand by more than 10%. Meanwhile, 42.1% of respondents say they will retain the same herd size, while 7.8% plan to reduce their herd size by 1-10%, and 6.1% plan to reduce by more than 10%.
Survey respondents also indicate a growing use of certain risk-management tools in 2012-13; 23.5% of respondents report having forward contracted calves last year, and 17.7% forward contracted inputs (Figure 7). Use of those tools will increase in 2012-13, respondents report (Figure 8), with 27.6% of respondents indicating they intend to forward contract calves, and 20.9% saying they intend to forward contract inputs.
An outside perspective
Nevil Speer, a Western Kentucky University professor of animal science, says the survey results indicate the industry is making good progress on the management and marketing side. “But we need to make better progress on the financial management side. That, however, will likely be driven further in years to come from various lending entities,” he explains.
Most interesting to him, Speer says, are the relationships around marketing and profitability that the survey results illuminate.
“Nearly half of all producers indicate they are involved in some type of differentiated marketing strategy, with almost 80% of those indicating it is a favorable endeavor. In other words, value-based marketing is favorable for nearly 40% of the respondents to this survey. We’ve come a long ways from 20 years ago and commodity-based marketing!”
In addition, Speer points out that nearly half of respondents are at least retaining ownership through the stocker phase. “That means they’re pretty intent on capturing the value of their genetic inputs and management beyond the weaning stage.
“What’s more, nearly one in four are involved in forward contracting calves. Thus, they’re using new strategies in an attempt to capture more revenue and exercise some alternative risk management to the operation.”