May 06, 2008 12:32 pm
Higher costs may force industry to downsize nation's cow herd
Escalating feed prices putting profit pinch on all segments
by Mark Parker
Farm Talk (Parsons, Kan.)
PARSONS, Kan. — There's more than one potential path to better beef prices but the most likely road is the one that leads to offering consumers fewer total pounds of product but at higher prices, according to James Mintert.
And that, the Kansas State University economist said, means the beef industry will contract—fewer cows and, probably, fewer cowboys.
Dramatic increases in production costs—led by record-high grain prices—have dished out economic hurt up and down the industry, particularly in the feeding sector, Mintert told cattlemen at last week's Beef Cattle and Forage Crops Field Day at the Southeast Agricultural Research Center near Mound Valley, Kan.
The other two paths to achieve the higher beef prices needed to keep up with higher costs are stronger domestic demand and stronger export demand, he said.
Strengthening domestic demand for beef, the economist asserted, is unlikely in the near-term. A weakening economy, Mintert noted, may have the reverse impact—a softening in beef demand as consumers struggle with other economic pressures.
Growth in the beef export market is far more likely, he said, but it will be difficult to gain enough of that market back to offset higher production costs. Mintert said Japan and South Korea are the keys to improving export demand and he called the reopening of the South Korean market "tremendous news" for the industry.
Exports to Japan, he said, are growing very slowly, primarily because of the age restriction on exports to Japan. Longer term, Mintert indicated that Japanese consumers heightened concerns about about food safety and a deep mistrust of the American product could continue to hold back U.S. beef exports, once the age restriction is lifted.
Increased costs are driving a continued reduction in the nation's cow herd, although the rate is still fairly slow, Mintert said.
According to K-State Farm Management numbers, total cow/calf production costs have risen about 25 percent since 2005 and will likely take a big jump this year as feed costs stand out as the 500-lb. gorilla in the room. Breakeven calf prices for 2008, figured against total costs, are in the $130 range.
Although returns to variable costs were still positive last year for the cow/calf sector, Mintert said, they were dramatically less than in 2005.
The result has been a 12 percent drop in U.S. beef cow numbers in 2006 and a 6 percent decrease in 2007. How much cow herd reduction occurs this year will be dictated by summer crop and pasture conditions.
In the feedlot, cost of gain has racheted up significantly while the prices paid for feeder cattle have not dropped enough to compensate, resulting in record losses for feeders.
And beef processors find themselves with too much capacity as cattle numbers, and their margins, decline.
In the past, high corn prices have tended to correct themselves. Short supplies led to higher prices and growers responded the following year with increased plantings and a return to normal yields which, ultimately, brought prices back down.
Now there's a totally different scenario at work as demand, especially for ethanol, promises to maintain record corn prices for the foreseeable future and Mintert cautioned that any weather-related threats to this year's corn crop could send prices much higher still.
"Historically, feed has always been the largest usage category for corn," Mintert pointed out. "In 2002, about 62 percent of the U.S. corn crop went to livestock feed and 11 percent went into ethanol.
"It's projected that in 2008, those numbers will change to about 46 percent for feed and 30 percent for ethanol and FAPRI (Food and Agricultural Policy Research Institute) is projecting that those two will cross over in the next few years.
"Even though we have the nation's second largest corn acreage projected for this year, corn ending stocks as a percentage of total usage is still expected to be less than 10 percent, based on trend-line yields. We've only gotten that low a couple of times before.
"So expect a lot of volatility in the market and keep in mind that any crop production problems will result in a significant increase in the corn price."
Faced with high-priced corn and an increasingly volatile corn market, Mintert suggested that the industry will need to manage feed costs more aggressively than ever before.
For this year, the economist said, smaller domestic beef supplies will support cattle prices somewhat. Additionally, he said, futures market prices have remained fairly high—"The futures market may be a little more optimistic than I am about reducing beef supplies."
Mintert said he is expecting 700-800-lb. steers at Dodge City to average just shy of $105 for the year.
For more complete economic information, Mintert suggested that cattlemen check out beefbasis.com, which features cattle basis risk analysis tools, and K-State's ag economics website, agmanager.info.
Mark Parker writes for Farm Talk in Parsons, Kan.
|
Resources
• Print this story
• E-mail this story
Photos
Mark Parker /Farm Talk
|
|
|
 |
|
Help Wanted
Big Red Restaurant Keys, OK All positions, apply in person....>MORE
Help Wanted
Part-Time Maintenance Person wanted at local apartment complex. Interested persons call 918-260-1835...>MORE
Store Associate
Store Associate Position
Progressive rent-to-own company looking for an individual with excellent communications sk...>MORE
Help Wanted
General Laborers needed apply in person, Park Hill Plants and Trees. 456-4548...>MORE
Help Wanted
Vo-Tech A Plus, Experience A Must! Adams Air, Heat and Refrigeration. 456-1429...>MORE
Help Wanted
Now Hiring all positions. Apply in person 4804 South Muskogee. ...>MORE
Help Wanted
Oaks Mission- Now accepting applications for Full Time Bus Drivers for the 2008- 2009 school year. Positions open until...>MORE
Help Wanted
Hail Repair Man and Body Repair Man, must have own body tools. Call: 918-239-0300...>MORE
Help Wanted
Day Care seeking help. Call Shelia 458-1001...>MORE
Help Wanted
Loftin Family Practice seeking energetic, friendly LPN for Tahlequah location. Please fax resume to 456-3107 or drop of...>MORE
Help Wanted
Teachers needed. After School M-F 3-6, Teacher M-F 8-3, Certified Teacher M-F 8-3, Certified Lifeguard PT, Twin Oaks Ac...>MORE
Help Wanted
Personal Care Aide for the Peggs/ Hulbert areas. Please call Carol Johnson @ Health Care Innovations, Private Services,...>MORE
Help Wanted
Big B Food and Deli seeking manager trainees. Mail resume to 429 S. Muskogee, Tahlequah 456-1781...>MORE
Help Wanted
Tahlequah Pediatrics seeking full time receptionist, experience preferred. Also seeking full time medical assistant or ...>MORE
Help Wanted
Are you looking for a OTR Company "That Delivers on it's Promises"? If so, Call Janice @ DMT Services, Inc- 800-237-1769...>MORE
Help Wanted:
Securitas Security Services USA Armed Security Officer/ Immediate Opening in Kansas, Oklahoma. Must be able to work mid...>MORE
See all ads |
|
CASH FOR JUNK
Or Unwanted Cars. Quick Income. Call 918-4564753...>MORE
Truck For Sale:
1981 Dodge Pickup, slant six engine, long bed, sliding rear window. Runs good, easy to work on, new front end bearings....>MORE
Pickup For Sale:
2001 Tundra V8, power, sharp, 129k miles, camper shell. $10,500 456-3407...>MORE
SELL YOUR AUTO HERE
CONTACT BRENDA OR HANNAH TO PLACE YOUR AUTO FOR SALE HERE! 918-456-8833 extension 10 or 11...>MORE
Car For Sale:
1994 Olds Cutlass Cieras, clean. $1800 316-0678...>MORE
Auto For Sale:
1998 Buick Regal 131k, 1-owner, loaded, excellent condition. $4,500 Call: 457-4246...>MORE
See all ads |
|
House For Rent:
Several 3bdrm, 2ba homes available, 2 car garage CH/A, utility room. No Pets! $400 deposit, $725 month. Call M-F 8-4p...>MORE
House For Rent:
3bdrm, 1.5ba, CH/A, fenced backyard. No Pets! $400 deposit, $600 month. Call M-F 8-4pm 456-2750...>MORE
Apartments For Rent:
2bdrm apartments available 1322 and 1316 East Boone. W/D hookups, no pets. $450 month, $400 deposit, lease required. ...>MORE
Rooms for Rent
weekly, monthly rates, 2 room efficiency, 1 room- refrigerator, microwave, satellite, bills paid, 458-1144 ext 22...>MORE
House For Rent:
2bdrm $300 a month, $200 deposit 456-8389...>MORE
HOUSE FOR SALE BY OWNER
House For Sale: 3/1.5/1 $79,500. 571-2357...>MORE
Mobile Homes For Sale:
A $15,000 MORT ASSISTANCE
OR 0% DOWN WITH LAND
SINGLE AND DOUBLEWIDE HOMES
NATIVE AMERICAN
GOV PROGR...>MORE
Apartment For Rent:
Nice! New! 2bdrm NSU adjacent. $200 deposit, $500 month 207-9245...>MORE
House For Rent:
3bdrm, 1.5B, CH/A, 2 car garage, new appliance $700. month, $650. deposit, References required, No Pets 918-816-1374, 91...>MORE
Apartment For Rent:
SPECIAL Large 1BDRM, Very Nice Inside, $235., Lease and References Required. 456-8009...>MORE
House For Rent:
320 dogwood month to month, 3 bedroom, 1 1/2 baths, CH/A. $650 per month and $650 deposit. Call Lonni Wright @ Century...>MORE
House For Rent:
2bdrm, 1ba, large utility room, fenced backyard, CH/A. No Pets! $400 deposit, $450 month. No HUD Call M-F 8-4pm 456-2...>MORE
Apartment For Rent:
Special large 1&2bdrm, very nice inside, $235 and $345., lease and references required. 456-8009...>MORE
Apartment For Rent:
One Bedroom Teehee Apartments 2001 E. Downing $285. One person only! 822-0267...>MORE
Room For Rent:
Big bedroom in house, bathroom, kitchen, W/D, near NSU $250 month, bills paid, clean lifestyle. 918-860-1520...>MORE
Mobile for Rent
Near NSU 2bdrm, $300.00 479-361-2080, 479-530-0002...>MORE
Mobile Home For Rent:
2+1 decking, quiet, dog(ok) $325. 822-7306...>MORE
Houses & Apartments For Rent:
Davis Rentals: Houses and
Retirement
Apartments;
Like New, 3bdrm,
All Appliances,
House for Rent
on Allen Circle.
456-4...>MORE
House For Rent:
1bdrm, 1ba, nice $400 monthly. 453-0115...>MORE
Mobile Home For Rent:
2bdrm, W/D, fenced yard $300 month, $300 deposit. 918-457-5911...>MORE
House For Rent:
4bdrm, 2ba 407 North. No inside pets! $600 month, $600 deposit. All new inside. 458-0342...>MORE
Apartment For Rent:
317 Bailey Blvd., Lower 500 sf, studio efficiency, in quiet country setting, in Sparrow Hawk Village. Includes utilitie...>MORE
House For Rent:
Large 1bdrm with Large Laundry Room, $295.00, Lease and References Required. 457-9639...>MORE
House For Rent:
4bdrm, 3ba Family Home in Southridge $1200. 918-931-2810...>MORE
Mobile Home For Rent:
3bdrm, 2ba $460 Senior Citizen Discount Available. No Pets! 456-5532...>MORE
See all ads |
|
Commercial Property :
2000 Sq. Ft. across from Chili’s $800 456-3359...>MORE
Lots For Sale:
Building Lots in town, all utilities available. 822-7084...>MORE
Commercial Property For Rent:
2000 SF Next to Doyle’s Shoes $1,250 per month. Call: Bryce 931-8386 or 456-3220...>MORE
Acreage For Sale:
2 Acres Teresita Spring Creek, utilities. $16,000. 918-207-2957...>MORE
Lots For Sale:
Three building lots approximately 1/2 lots plated, rural water, gas. $15,000 each. 431-0030...>MORE
See all ads |
|
 |
|
