What is in this article?:
For almost 20 years, I’ve coordinated a year-end review of the beef industry by independent cattle consultants. While opinions have differed significantly in previous years, these eight consultants concur that widespread drought was the major event in 2012.
For 2013, improved industry profitability will be dependent on the weather. Meanwhile, continued drought could be devastating, and students of history know that severe droughts are often several years in duration.
Cattlemen’s Nutrition Services
The cattle industry faces more challenges today than perhaps at any time in several decades. For starters, losses on fed cattle continue to mount, but higher fat cattle prices in the near term hopefully will help.
High feeder cattle and ration prices, excess feedlot and packer capacity, and persistent drought in much of the U.S. are major hurdles, signaling that more shrinkage in the U.S. beef cowherd is likely. At the same time, however, feedlot capacity is increasing in some parts of the country.
With the November election behind us, we likely can expect a surge in taxes and regulations. Throw in weak economic conditions in the U.S. and abroad, and it’s easy to be a little pessimistic about the industry’s direction.
Cattle performance across most of the industry has been fantastic for the last two years. At some point, Mother Nature will change that, with potentially ugly results.
Feedlots practicing good risk management have fared well economically, and cattle operations with significant landholdings saw their net worth grow appreciably again in 2012. Some parts of the U.S. continue to have a competitive advantage in cost of production and ration prices, and this will continue to impact which and where cattle are fed.
All industry segments must adapt to a “new normal” as we move into 2013 and continue to wrestle with high feedlot replacement costs and risky breakevens. The current Choice-Select spread should get all of our attentions as well. While it’s obvious that the industry will look different five years from now, some excellent opportunities for those who can adapt are likely as well.