“These are not fun times,” says Jim Robb, director of the Livestock Marketing Information Center (LMIC), “but this isn’t a bad time to be in the cattle business.” Robb told attendees of the recent Wyoming/western Nebraska conference in Torrington, WY, that he sees higher cattle prices by 2010, but producers need to be nimble to handle the coming volatility.
“Corn prices will spike up and down. You have to revise what you are doing every three months. If the corn prices are up, recognize that and be prepared with a management strategy for the next three months,” he says.
Three months is important, he says, reviewing the time prices took to stabilize after 9/11 and the BSE case in Canada. “You have to be managing within those time frames. You have to act quickly or plan to wait three months.”
Robb says meat market prices overall aren’t as bad as what they could be, given what consumers are doing in the market place. However, consumers have quit buying expensive beef cuts and are buying more chuck, round and hamburger, he says.
“This is a full-blown recession,” he says. “Consumers have traded down. Restaurants are going out of business. We think the economy will get better next summer. By the fourth quarter of 2009, we’ll begin climbing out of this. We are halfway through this economic meltdown with 13-15 months to go.”
Robb says beef-cattle production is declining and the supply side will tighten; plus, the export market potential will decrease significantly. Along with this, total beef consumption is the lowest since 1959, and he predicts that amount will be lower next year.
“It will only get smaller the next two years,” he said. “Demand is where the problem is.”
He predicts fluctuations in the corn market will continue, and the volatility in the oil market is directly tied to the corn market and calf and yearling markets.
“Volatility in grain and feedstuffs is now embedded in the system, which is influencing the cost of gain in the feedlots,” Robb says. “Cattle on feed is 7% below a year ago. After 18 months of losing money every month, more feedlots in the U.S. will exit the business in the next six months.”
Shrinking cow herds are not limited to the U.S., however. Robb says world numbers are decreasing, and the number of cattle in Canada is decreasing faster than in the U.S. In addition, cattle numbers in Europe and Mexico are also shrinking.
-- University of Wyoming release