What is in this article?:
For the first time in four years, our annual survey of BEEF readers indicates that producer optimism has taken a dip.
Risk management is important
If liquidation is the case, the tighter numbers will only exacerbate the volatility and velocity of market moves this year and beyond. To deal with that uncertainty, some producers are looking at various risk management alternatives.
“Some,” however, is the operative word. Almost 59% of respondents didn’t use any of the risk management tools last year that were listed in the survey. Of those who did, 23% forwarded-contracted their calves, 16% used the futures market, 16% forward-contracted their inputs and 12% used options (Figure 8).
That trend held true when readers were asked what risk management practices were under consideration for this year, though the numbers ticked up very slightly. Overall, 52.5% say they won’t use any of the listed risk management tools this year. For those who will, 25% say they’ll forward-contract their calves, 21% will offset risk by forward-contracting inputs, 19% plan to use futures and 15% will try options (Figure 9).
In addition to asking readers about operational plans, BEEF asked their opinions on several current industry issues.
- Overall, 43% of respondents say drought is an immediate issue and is affecting their short-term outlook and management. Looking at a regional breakdown of respondents, 67% of those from the West South Central (AR, LA, OK and TX) region of the U.S., 54% of those from the Mountain States, and 45% of those from the West North Central states say drought is a major factor in their management plans. What’s more, 37% of all respondents say drought is a factor, but they have some latitude, in that it’s not having a significant effect on their short- or long-term outlook. And 20% say drought isn’t a factor this year on their operations.
- Earlier this year, USDA released its revised animal disease traceability program. According to BEEF readers, 47% aren’t thrilled with the program, but say it’s better than nothing. Ten percent hate it, 6% love it and 38% say they don’t know much about the program (Figure 10).
- Industry consolidation and concentration has long been a concern to many. When asked to rank their level of concern on a scale of 1 to 5, 43% came in at a 3, indicating they are somewhat concerned; 10% checked a 2; and 12% checked a 1, indicating they are not concerned. However, 15% notched a 4, and 19% marked a 5, which indicates it’s a major concern to them.
- BEEF asked readers how concerned they are about feedlots and packers exiting the business and reducing marketing opportunities for their cattle. Overall, 39% were somewhat concerned, clicking on No. 3, while 24% notched No. 4, and 31% hit No. 5, indicating major concern. Only 3.2% indicated a 1, which is not concerned at all, and 2.4% hit No. 2.
- With social and political activism seemingly on the upswing, 39% of respondents reported being more concerned about domestic terrorism and animal rights terrorists than they were last year. However, 58% said their level of concern is similar to last year, and 3% said they are less concerned.
- On the other side of that equation is the need for individual producers to speak up and let their elected officials know their thoughts and concerns. A slight majority of respondents, at 54%, say they have made contact with state or federal elected officials last year. On the other hand, 46% indicate they didn’t share their concerns directly with their elected officials.
Perhaps that’s a reflection of producers’ general outlook on larger social and political trends in the U.S. A strong majority (64%) answered “no” when asked if they felt the U.S. is headed in the right direction. Another 19% don’t know, and 17% said “yes” (Figure 11).
Is the dip in the BEEF ROI just a one-year anomaly as producers react to ongoing drought and an uncertain market? Only time and Mother Nature can answer that question. But, this year’s dip in optimism aside, beef producers are a resilient lot. BEEF readers have weathered drought and crazy markets before, and they’ll no doubt emerge from this round battered and bruised, but standing tall.
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