Building a Case for Expansion


Speaking to a group meeting at JBS headquarters in Greeley, Colo. last week, economist Jim Robb, director of the Livestock Marketing Information Center, outlined reasons cow-calf producers could reap financial benefits by expanding their cow herds over the next few years.

He also noted some concerns, including stagnant economic growth, high input prices and U.S. consumers tightening their purse strings, but said most signs point to exceptionally strong cow-calf returns in coming years. Among his points:

•The domestic beef-demand index, at 75, is up slightly from 74 during 2010.

•Global populations will grow by 33 percent by 2050, according to U.N projections, and demand for animal-based foods will double as incomes improve in developing countries.

•Hog prices are low and total U.S. pork production is unlikely to increase until at least 2013, in spite of pork exports that total 20 percent of U.S. production.

•U.S. chicken production will show a 5 to 7 percent year-to-year decline in 2011, with processors losing four to six cents per pound on chickens.

•Total red meat and poultry production will decline this year and in 2012.

•Cull-cow prices reached a high around $80 per hundredweight last spring, and likely will approach those levels again next spring.

•Cow numbers are down sharply, as the Southern Plains region suffers through the worst drought in 100 years. As much as 45 percent of pasture and range in the United States is in poor or very poor condition.

•Cow numbers also are down in the Midwest as landowners shift to corn production.

•Southeastern producers are heavily dependent on fertilizers for forage production, and high prices could force them to reduce stocking rates.

•Some parts of the drought-stricken regions will not return to beef production, but most will. Robb says owners of significant acreage in oil-producing areas such as Oklahoma and Texas are sitting on substantial cash and are in position to purchase cows and stockers once forage conditions improve.

•LMIC projects $100 per head cow-calf returns this year, which signals expansion, but so far it isn’t happening. U.S cow inventories are likely to keep declining until 2015, depending on drought.

•The U.S. will export more beef than it imports, on a tonnage basis, this year.

•U.S. beef production will show year-to-year declines in every quarter of 2012 and 2013.

•LMIC projects $125 per hundredweight fed cattle and $155 calves in 2013.

Finally Robb notes, successful herd expansion for individual producers will depend largely on efficiency, through genetics and management, to control costs of developing and maintaining more females. With high prices projected for all classes of cattle, Robb says “marketing has become easy. The production side is the key challenge.”

 Source: Drovers Cattle Network

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