Top 10 issues facing beef producersTop 10 issues facing beef producers
July 21, 2016
2016 came to the fore with the warm glow of profits the previous two years still fresh on the minds of beef producers. As the year progressed, however, market volatility became pronounced, a very unusual presidential primary season caused heads to shake and spring rains fell, sometimes far too much.
What’s ahead for the rest of the year? Here, in no particular order, are the megatrends to watch as the beef business looks ahead, identified by the editors of BEEF.
Expansion Challenges:Herd expansion, or at least pasture restocking, will likely slow but won’t stop. Heifer retention the past two years will produce a larger calf crop this year with a larger fall run than we’ve seen in a good many years. That will result in bigger feedyard placements beginning in late 2016 and carrying over into 2017, assuming cattle feeders continue to place heavier-weight feeders and shun lighter-weight calves.
Cyclically Lower Prices:With herd expansion, we can expect calf and feeder cattle prices to continue to respond to cyclical pressures. BEEF’s Market Advisor, Harlan Hughes, suggests the lowest cattle prices will be from 2018 to 2020. In the meantime, expect continued volatility, particularly in the futures market, which will cause more voices to question its usefulness. This makes all types of risk management important for cattle producers to consider.
Input Volatility:As cattle prices ratcheted up in 2014 and 2015, so did input costs. These costs will eventually decline, but will lag the drop in both cattle and grain prices. For instance, while land prices have decreased somewhat, both to buy and to rent, crop ground has decreased at a faster rate than range and pasture land. Continued strength in ranch land prices will challenge new and expanding producers.
Continued Economic Volatility:Global economies, as well as the U.S. economy, will face ongoing headwinds. This will affect cattle producers in a number of ways, but particularly as the beef business continues to aggressively work to expand export markets. Fortunately, high-quality U.S. beef is valued in many overseas markets, giving U.S. beef producers continued opportunities in the global market.
Animal Health:Morbidity and mortality, particularly with stockers and cattle feeders, remains an ongoing concern. In spite of a remarkable array of quality animal health products and a changing approach to cattle handling and management courtesy of the Beef Quality Assurance (BQA) program, the beef business is making little headway in moving the needle. Is it, as some suggest, a result of the industry’s push to produce bigger, faster-growing cattle?
Consumer, Retailer Perceptions:If you’re tired of reading about sustainability, take a deep seat because the conversation is just beginning. Likewise, continued and even greater pressure on antibiotics use, growth promotants and other technologies will keep the heat on traditional beef production as millennials use their purchasing power and social media presence to mold the world into their vision and retailers and restaurants respond.
Meanwhile, retail prices have dropped, and will continue to drop, as more cattle come to market. However, retail prices will drop at a slower rate than wholesale beef and live cattle prices, and the resulting spread will challenge beef producers.
Political Uncertainty:It’s safe to say that the 2016 presidential election will be one of the most unusual races we’ve seen in a while. The rhetoric is heating up with the Republican convention is this week and the Democratic convention next week, indicating a long and wearying campaign. Given that none of the presidential front-runners have an understanding of commercial agriculture, the political risk for beef producers will be high. That makes House and Senate campaigns all the more critical for the beef business.
Veterinary Feed Directive:Jan. 1, 2017, is coming and with it will come some significant changes in how animal agriculture can use medically-important antibiotics. While the VFD will have a greater effect on pork and poultry producers and a lesser effect on cattle feeders, all sectors of the cattle business will be affected. Unfortunately, many cow-calf and stocker operators won’t fully appreciate that affect until they try to buy a bag a medicated feed and discover it’s no longer available over the counter.
Consolidation Will Continue:The steady and persistent trend toward consolidation will continue, particularly for cattle feeders and packers. However, cow-calf producers and stocker operators are not immune. The net result of many of the other trends discussed here is that, in order to remain as a viable, profitable business, beef producers will need to get larger.
La Nina is Coming, Maybe:Forecasters once were confidently predicting that a La Nina would arrive sometime this summer or fall. While those forecasts have backed off some, drought is an ever-present possibility. Dry weather is beginning to take hold of some areas of the country and the possibility of a La Nina is still with us. Should that happen, drought will return to a large swath of cow country. Beef producers will be well advised to plan and prepare now for that eventuality.
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