How has the beef industry changed?

Cyclical patterns have often been associated with the beef industry, demonstrating swings in cowherd production numbers, but this is no longer the case in today’s industry. “We have definitely shifted away from that cyclical pattern we were familiar with,” noted Nevil Speer, animal scientist at Western Kentucky University.  In addition to the industry no longer following a cyclical pattern of reduction and growth in cow numbers, Speer reported that 2012 will reflect the first time the industry has less than 30 million beef cows in production. Speer was a presenter at Cattlemen’s College, held in conjunction with the 2012 Cattle Industry Convention in early February in Nashville, TN.

In addition to addressing how beef producers can manage risk in volatile times, Speer focused on many of the changes occurring in the beef industry. One industry change is the decline in total beef cattle operations.  “Since 1990, the industry has gone from 900,000 down to 750,000 operations and overwhelming this reduction has occurred in the segment of herds with less than 50 head,” Speer said.  Many operators who left the business were those with 50 head of cows or less. These people were part-time operators and as the economy pressured them, cowherd liquidations in this size category took place.  Figure 1, demonstrates the breakdown of cow herd’s by size and percentage of total inventory as it relates to the total beef cattle inventory numbers.

click image to zoom

Speer noted efficiency in the business has been very influential in offsetting the numbers seen in cowherd liquidation over the past 15 years.  He reported an actual cowherd inventory in 1995 of 35 million head produced the equivalent of nearly 37 million cows when adjusting for steer carcass weights. With continued enhancements in technology and efficiency, 2011’s much smaller cowherd of approximately 30 million cows is producing the equivalent of 34.9 million cows, nearly the same that five million more cows produced 15 years earlier. He attributed this accomplishment to beef producers who worked hard to become more efficient and fine tune their operations to remain viable during volatile times.

During these changing times where the industry has been faced with increased input costs, Speer encouraged producers to know their cow costs. Figure 2, reports cash costs of beef cow/calf operators.

click image to zoom

Speer demonstrated the importance of managing input costs with an example of measuring profitability after factoring in price, production and costs of operation which had been analyzed by Kansas State University Farm Business Management Program.  When producers had comparable production and comparable price for their product, what separated those classified as profitable, from those less profitable, was input costs. Speer encourages producers to focus on how well they are managing costs, and focus on what the business environment is telling the industry so they can construct a marketing and management plan around those signals.

Source: Lynn Gordon