“With record high beef prices, it’s a great time to be in the cattle business,” Scott Brown told a meeting of Miller County producers.
The University of Missouri beef economist’s outlook shows a $250 return per cow in the coming year. In the previous beef cycle, returns topped at under $100 per cow.
“We’ve never seen anything like current prices,” Brown said.
Then he showed price projections from the Livestock Market Information Center. Their cow-calf returns show $350 for 2014—and 2015. Those returns are over cash cost plus pasture rent.
“Before you go home and double the size of your cow herd, remember the cattle cycle,” Brown said. When cow numbers go down, prices go up. However, when numbers go up, prices go down.
The Jan. 1 cow count shows the U.S. herd declined to 87.7 million cattle. Go back to the 1950s, when prices were high, for the previous low of just over 90 million head.
“While supply is short, prices look good for the next few years.” Brown said. “While those outlooks are great, there are always risks.”
Weather can change. Domestic demand for beef can continue down. Thriving exports can end. “It happened with the ‘mad cow,’ or BSE, in 2001.”
The beef cow herd will expand, Brown said. “We’re at a turning point. With this much money on the table, we will add more cows.”
He reminded the 50 producers of an old saying: “The best cure for high prices is high prices.”
“To remain in the industry long term, you must be efficient,” Brown said. Least-cost production makes a difference. And every farm needs a risk strategy.
One thing making economics brighter for cattle producers is a change in the price of corn, a major feed for market cattle. “Corn at $4.50 per bushel looks better than corn at $7.50.
“Recall, we didn’t think $4.50 corn looked so good on the way up.”
However, continued high-price soybeans and soybean meal tell a different story. Cattle don’t eat much soybean meal. Hogs and poultry do. “High-priced soybeans may dampen increases of pork and chicken,” Brown says.
In past cycles, white meats replaced beef at the grocery case, but times change. More meat is eaten in restaurants today.
“In Iberia, home-cooked meals are usual. On both coasts, more food dollars are spent in restaurants than grocery stores. In restaurants, beef still brings top dollar.”