With a severe drought and high production costs, it was no surprise that when the inventory report came out in January, there were over 700,000 fewer beef cows in the U.S. than a year ago. Even when all that is considered, the state of the economy is having the biggest impact on cattle prices. Beef supplies continue to contract, and they also continue to be sold at lower prices, as Joe Brown tells us in this week’s From The Ground Up.
"It’s not anybody within the industry that’s really happy about what’s going on, or making any money. For several years, we had it where every segment of the industry was making money, but it’s not that way now."
"And if we look at how many are going to market now, we’re continuing to cut the cow herd, so we’re looking at over the next few years longer term a smaller cow herd, less beef production."
David Andersen is with Texas Agrilife Extension and says in addition to the drought, ranchers are reacting to high input costs.
"We’re still adjusting in the cattle industry to historically very high feed costs, and when feed costs go up, calf prices go down"
Pete Scarmardo is a Brazos Valley rancher and cattle buyer.
"Right now if you’re a cow and calf producer, you don’t like what your calves bring because it’s not enough. If you’re a stocker operator buying them, they’re too high, feeder buying feeder cattle you think they’re too high. When you’re selling these fat cattle out of the feed yard, they’re too cheap."
The savings rate in the U.S. went from negative late last year to a positive 5% currently.
"They may have moved from steaks to hamburger, costing less money, they may have moved from beef to chicken that’s cheaper, or pork that’s cheaper, but consumers are doing what they have to do to cut their spending."
"Until the whole world economy and U.S. economy gets better, we’re going to have trouble selling beef at the levels that we need to to be profitable."
"From a supply standpoint, we’re setting ourselves up for a big rally in cattle prices, for producers. When exactly that’s gonna come is the tough one, cause it’s when is the economy going to improve."
And finding a crystal ball that can predict the answer to that question is about as likely as one that can tip us off about what Mother Nature has in store. I’m Joe Brown, looking at Brazos Valley agriculture, From The Ground Up.
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