Taking a close look at 2008 beef business trends.
This year was not a kind one to U.S. cattle producers. In fact, 2008 will go down as the worst year ever for cattle feeding and the worst in 10 years for cow-calf operations. In fact, many operations worked all year and ended-up not covering their cash expenses. In much of 2008, producers faced surging costs of production (corn, hay, fuel, etc.) and cattle prices that were unable to keep up the pace.
In 2008, annualized estimated cattle feeding returns for the Southern Plains were the lowest ever in the LMIC calculations (back to the early 1970’s). Those returns are based on all costs of feeding-out a 750-pound steer in a commercial feedlot. For the year those calculated losses were about $120.00 per steer and those losses surpassed the previous worst year (2006) by about $45.00 per steer. On a monthly basis, the largest losses were for fed cattle sold in the first few months and the last few months of the year. Estimated cattle feeding returns have been negative for every month since May 2007. Those losses are why recent large declines in corn prices, and hence cost of feedlot gain, have not supported calf and yearling prices.
Even some cow-calf producers with lower than average production costs saw their chances to cover their cost of production slip away with the decline in calf prices this fall. Steer calves (500-to 600-pound) in the Southern Plains this fall quarter were the lowest since 2002. While the estimated cost per cow was up about $150.00 between 2003 and 2008 for a commercial cow-calf operation in the Southern plains. So, for the first time in 10 years, estimated returns in the Southern Plains did not cover cash costs of production (loss of $25.00 to $30.00 per cow). Those cow-calf operation losses have translated into increased cow slaughter this fall and cow-calf operations will continue to reduce the number of heifers held for breeding herd purposes in order to pay their expenses.