My View From The Country

What Are The Next Beef Industry Front Burner Issues?

What factors are shaping your plans in the post-drought environment?

The dominant issues of the day are drought, rising feed and energy costs, and industry consolidation. And all these concerns exist against a backdrop of ever-tightening supplies and surprisingly strong demand.

In this scenario, cow-calf producers are focused on surviving the drought to take advantage of the opportunities that will emerge on the other side. Meanwhile, feedlots and packers are wrestling with increased input costs, prices that can’t keep pace, and excess capacity. Illustrating that the burdens of overcapacity are real, we saw several mid-sized feedlots shut down this week, or announce that they would be shutting down.

A Closer Look: The Consolidation Dilemma

And don’t forget the full-court press by the Humane Society of the U.S. and other activists groups on the regulatory and judicial fronts.

Without question, these are the driving issues of the day, though drought has a way of consuming all thoughts relative to the future because the future becomes irrelevant when it’s in doubt. Long-term plans get shelved and survival becomes the focus.

But history tells us it will rain again, cattle numbers will expand, market equilibrium will return, and margin considerations will once again be paramount to profitability. The other long-term trends of stabilizing demand, narrowing market targets, more specialization and more price differentiation also will again emerge as the market stabilizes. In addition, the value of genetics, and the importance of management and marketing, will continue to escalate.

BEEF Video: Data Feedback Fuels Premiums Says U.S. Premium Beef

Without question, the pressure from environmental and animal welfare groups will continue to grow. So will the importance of an ever-intrusive and more powerful federal government; I believe elections will only affect the magnitude, but not the long-term trend in these areas.

All these issues and concerns are fairly obvious, though I think we tend to underestimate their significance. But what other big drivers are out there that we should be contemplating? Without question, the long-term changes relative to hay and grain prices will forever alter livestock rations and ration costs. I believe trends in land ownership and demographics will have significant ramifications on the makeup of our industry as well. And the two dynamics of growth in hobby ranching and large production units will likely create two divergent industries with different goals, opportunities and challenges. Integrating the two into a cohesive industry that can grow demand will be a key to shaping our industry.

What are your thoughts on the drivers that will shape our industry? Where would the industry be today without the droughts of the last few years, or with access to our markets restored and market share regained? Is there a viable alternative to corn in cattle rations, or do we simply need to continue to downsize in accordance with the size of the ethanol mandates? What factors are shaping your plans in the post-drought environment? Let’s start a discussion by leaving your thoughts in the comments section below.

Discuss this Blog Entry 5

Anonymous (not verified)
on Oct 19, 2012

Maybe I don't understand the big picture. I don't see the problem. Many farmers around here simply raise the amount of crops they need to fee the number of livestock they have. Is that unusual ?

Jim McGrann (not verified)
on Oct 19, 2012

Troy,
Be careful using the term hobby ranch as it has serious IRS implications. It's better to use part-time or life style.
Jim

on Oct 20, 2012

If the economy, continues to worsen, (although the government will tell you different), everything will get more expensive. From feed, to shipping final product, etc. Thinking the term local will become a daily word, how will large scale farms be able to continue ?

Rex (not verified)
on Oct 21, 2012

Troy,
Clarify hobby ranch.
Do you mean operations like Silver Spur and Turner Buffalo Ranches (#1 and #2 largest US landowners) who made their money in communications and now spend it ranching in a big way.
Or do you mean the small operators who own about a quarter of the cow herd and rely on their jobs in town or retirement income to make ends meet? Many of them feed the know your farmer system and niche markets which make opportunities for the bigger branded beef deals. More importantly, their is a good chance that when they retire, houses not cows will be next use of their land.

Jim Sturrock (not verified)
on Oct 25, 2012

Troy'
Today's business and agriculture is no different than it was in the 50's other than my age and prices are holding up on farm products this go around. Drought, costs of doing business and escalating land values are the same except for number of "0's" behind the first number, which continue to multiply like flies on a cow pie in the middle of a hot summer day. We in business of agriculture need to focus on ratios or % not the sale price of each product. Whether today or yesteryear, costs divided by sales equals a comparable annalistic number. Example my goal is Feed Cost divided by Sales equal 40% (375 lb @ $1.90 = 712.50 X .40 = 285; yesteryear 375 @ .19 = 71.25 X .40 = 28.50) Another example 1 ton Chev. 35,000 vs. 1.500, who recalls what corn was going for when feed lots started in the late 40's? So, stop win-ning for there is no cheap cheese to go with it, grab your boot straps and start pulling yourselves up.

Happy days are here, Jim

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What's My View From The Country?

As a fulltime rancher, opinion contributor Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

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Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

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