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All In All, We've Been Pretty Lucky

The U.S. International Trade Commission (ITC) recently estimated that trade restrictions that were the direct result of BSE cost the U.S. cattle industry just over $11 billion from 2004 to 2007. The ITC also estimated that other tariff and tariff-rate quota restrictions cost the industry approximately $6.3 billion from 2004 to 2007. Without those losses, cattlemen’s income would have increased by roughly 8.5%!

The lucky part lies in the fact that cattle numbers were relatively tight and demand was solid during this timeframe, which allowed the cow-calf industry to actually remain profitable during this period. The sobering part is that while livestock, and especially beef producers, were profitable, they missed out on the soaring income levels the other ag segments experienced during this time.

I've never seen much point in looking back at what could or should have been; it’s always a better practice to look ahead. Still, had we not had to deal with ethanol mandates and BSE the last four years, we would have been the most profitable in the history of the cow-calf business.

The exciting thing is that while global macro economic conditions and the likely strengthening of the U.S dollar will make it more challenging to grow exports, the internal industry conditions are still largely in place for a very solid market situation the next several years. But as one analyst said, “People may like and even prefer beef again, but that doesn't mean much if they can't afford it.”

The fact that cattle numbers may be relatively tight doesn't mean much if government policies continue to double the cost of feed, and oil prices push the remaining input costs higher, as well.
-- Troy Marshall