Producer Optimism Index
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.
Among the respondents expressing more optimism of the short term, 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 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, 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 cited government regulations/oversight, increased input costs and consumer demand as the main reasons.
When asked what strategies they were employing to decrease feed costs in the short term, 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, 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.
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.
Use of risk-management tools tools will increase in 2012-13, respondents report, with 27.6% of respondents indicating they intend to forward contract calves, and 20.9% saying they intend to forward contract inputs.
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. 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%.
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.