Cash cow costs plus pasture jumped from about $550.00/cow five years ago to nearly $800 in 2013, according to the Livestock Marketing Information Center (LMIC). That’s $100 more than last year, based on 14 cost categories.
“Fortunately for the cow-calf sector, cattle prices this fall are higher than a year ago. So, estimated cow-calf returns per cow will be up in 2013 compared to 2012’s,” LMIC analysts say. They estimate returns over cash costs plus pasture rent his year at $125/cow, compared to $32 last year.
“However, there is a major cautionary note, “LMIC analysts add: “Due to drought, many cow-calf operations had to sell off many cows. Even if per-cow returns are higher, their enterprise is providing limited net income because in 2013 they have fewer calves to sell than in prior years.”
LMIC analysts expect cow costs to decline slightly next year with lower feed prices. “That cost drop plus high cattle prices set the stage for much improved per-cow returns in 2014. In fact, those cash returns could substantially exceed 2004’s record high,” they say.
Still, historically sky-high costs coupled with increasing uncertainty means herd expansion my by challenged even with abundant forage and water.
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Glynn Tonsor, Kansas State University livestock economist, notes in this week’s In the Cattle Markets that the Economic Policy Uncertainty Index in September was higher than during the Black Monday period of 1987 when global financial markets crashed.
“Appreciating the economic implications of heightened uncertainty has a direct role in understanding current and likely behavior of cattle producers,” Tonsor says, “As uncertainty is elevated, most economists argue larger expected returns are required to effectively trigger major investments such as those required to expand the breeding herd. The personal background of most cow-calf producers coupled with the ever-increasing environment of uncertainty on many economically important points that producers individually have no control of has led to limited moves to date in initiating aggregate herd expansion…
“…When uncertainty on consumer demand strength, tax and regulatory policies, and global macroeconomic conditions are considered, one can gain an even deeper appreciation of how historically high projected returns for cow-calf producers may not be sufficient to trigger herd expansion volumes some industry leaders would like to see, and why simply yes-no answers rarely apply.”
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