What is in this article?:
- What Are The Obstacles Ahead For The U.S. Beef Industry?
- Shots in the dark
What are the factors to watch in the industry’s coming decade? Two industry experts look ahead.
Shots in the dark
While some of those pronouncements seem wildly off target in retrospect, others are prescient. But all these thoughts were conceived without the benefit of knowing the myriad of unknowable factors that can upset the best-laid plans.
No one in 1989 would have factored in events like the 9/11/01 terrorist attacks on the East Coast, or the BSE case of 2003 that shut down U.S. beef access to world export markets. Then there was the general economic
meltdown of 2008, and prolonged severe drought that hit the heart of ranch country a few years ago. And don’t forget the effect of sensational media reports like that on lean finely textured beef that fueled a social media fury (who foresaw social media?), essentially sidelining a 20-year-old process. Then there is the renewable fuel mandate.
In some respects, there’s even more uncertainty in today’s market than 25 years ago, thanks to a more globalized economic market.
“It’s pretty clear that government regulation/policy is increasingly an important influence across any number of facets,” says Nevil Speer, Western Kentucky University. “For example, the renewable fuel policy has dramatically influenced agriculture in any number of ways. And now the unwinding of that program will be equally disturbing.”
Equally concerning is monetary policy, he adds. “I continually tell producers they HAVE to watch what goes on with the Federal Reserve and other international central bank decisions. It seems so ambiguous or disconnected from producers’ everyday business decisions, but it has a huge effect in influencing money flow everywhere. Therefore, it has fingers into the broader economy and economic growth, lending opportunities, interest rates, exchange rates and international trade.”
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Speer says managing capital will be increasingly important. “The cattle business is increasingly becoming a highly capital-intensive business. Those who manage their capital efficiently will thrive; those who don’t will get left behind. That’s especially true as interest rates creep higher over time, assuming they will.”
Too often, Speer adds, producers focus strictly on production as a template for progress. “But today it must be both production and financial management. That’s hard to do, but it’s true in any business. We’re just catching up.”
Meanwhile, Glynn Tonsor, a Kansas State University economics professor, says general global economic strength is paramount for overall beef demand growth in the coming decade. “There’s reason to be optimistic about global growth, and that’s a positive for the U.S. beef industry in a five- to 10-year horizon,” he says.
However, he shares the concern of many producers regarding the growing regulatory burden. “At this point, we’re not certain how it might change over the next 5-10 years, but there’s a lot of uncertainty regarding how much more involved government will get. People are concerned about the current level and direction of government regulation, and whether it will ever stop,” Tonsor says.
All in all, however, Tonsor says he’s optimistic about the coming decade. “Laying a broad brush over the entire industry, I’m very bullish. The U.S. has a clear comparative advantage in grain-finished beef production in the world, and I don’t think we’ll totally regulate that away. We may keep eroding it, but I don’t think we’ll make it disappear.”
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