Ethanol, of course, is the story of the year for the cattle industry. Demand for corn by ethanol refiners drove corn prices past $4 per bushel this year, causing a predictable backlash from livestock producers. Cattle feeders lost money, feeder-cattle prices dropped, and everywhere you looked there was another cowboy preaching gloom and doom for the cattle industry.
It looked like the only direction for this corn market was up, but just as we started to get a grip on that idea, corn prices tumbled dramatically. Last month, both old-crop September and new-crop December corn futures fell to the lowest levels since October and November of 2006. December corn fell more than $1 per bushel off contract highs set in June.
The result was predictably positive for the cattle markets. Fed-cattle prices rallied, and feeder-cattle prices gained significant strength across the country. In short, the drop in corn prices was as if a cloud had lifted from the cattle industry. And barring any major problems with this year’s crop between now and harvest, it appears corn prices will trade at a more manageable level for cattlemen.
Adding to the positive news last month was the U.S. Department of Agriculture’s mid-year cattle inventory report which suggested that expansion of the nation’s herd is not underway. Market analysts believe the report lends support to cattle markets through 2009.
USDA estimates the cattle inventory totaled 104.8 million head on July 1, down 400,000 head from July 1, 2006. Analysts believe the severe drought in several regions of the country has erased the slight growth in the cow herd seen over the past two years.
Beef cows that have calved were pegged at 33.35 million head, a decrease of 100,000 head from mid-year 2006. Beef replacement heifers dropped by 300,000 head. Those numbers suggest reduced calf supplies through 2008.
The calf crop for the first six months of 2007 is estimated at 27.15 million head, down 200,000 head from January through June 2006. Analysts say those numbers also support continued strong cattle and calf markets for the next 24 to 30 months.
Beyond the grain and livestock markets, several new programs have been unveiled that will help create demand for your product. One of those is a partnership between dairy and beef producers. Last month, a nutrition symposium was held in Denver by the Beef Checkoff Program and the National Dairy Council, the nutrition communications, education and research arm of Dairy Management Inc., which manages the Dairy Checkoff Program. The symposium was held to discuss common challenges and opportunities in promoting the nutritional benefits of beef and dairy products to consumers.
Another new beef checkoff-funded project is a new line of beef value cuts — fabricated from the beef chuck roll. According to the Beef Innovations Group, which coordinates research and marketing efforts to expand the value-cuts program, at least four new cuts from the chuck roll will debut in foodservice and retail channels in 2008. The new cuts include tender steaks for grilling, an affordable roast for dry roasting, boneless country-style ribs and a fully cooked sumptuous roast.
According to BIG, the new cuts represent the “next frontier” in the value cuts program that began in the late 1990s with the checkoff’s groundbreaking, muscle-profiling research. According to Cattle-Fax estimates, the first group of value cuts — including the Flat Iron and Petite Tender — added $50 to $60 per head to the value of the chuck.
While this year began on a dreary note for cattlemen, summer has brought a reversal of fortune for many. Cattle feeders may not benefit from $2 corn again anytime soon, but it’s possible that programs started in 2007, such as the partnership between dairy and beef producers and the new line of beef value cuts, will help increase beef demand enough to offset higher grain prices.