Column of the Month
February 2010

     All segments of the cattle industry have had a tough operating environment the last several years. The size of our beef herd continues to decline in response to greater animal productivity, lower demand for beef, higher operating costs and volatile weather. Beef cow numbers today are less than 47 years ago. Fixed costs for feed and fuel have narrowed margins for most cow-calf producers and provide no incentive to grow. It will take a few years of greener pastures before beef cow numbers reverse this trend and show significant growth.

     CattleFax estimates the cattle feeding sector alone has lost $7.4 billion in equity since 2005. Much of this is related to our sluggish economy and the resulting decline in consumer demand for beef. Cattle feeding returns for 2009 are projected to have been the second poorest in history. Both our feeding and packing industries are struggling with over-capacity.

     Other factors include pressure from animal rights and environmental groups. Our industry is responding to the inaccuracies these groups claim about livestock production. We need to double our individual advocacy efforts to offset these opposing interests. In addition, the current administration and Congress have proposed water and air regulations that will change the way we do business and harm our ability to compete in the world marketplace.

     The struggling economy has had a negative impact on demand for our products. Consumers are spending less and focusing on paying down debt. They have seen several years of reduced income. Beef demand has shifted to consumers eating more meals at home and fewer in restaurants as they try to save money. Restaurants, particularly the high-end houses that serve our top-quality beef, have experienced declines in traffic that drive beef demand lower.

     As we consider these factors, our basic optimism is what keeps us motivated. We get up every day to meet these challenges head-on as we work to produce safe, wholesome and nutritious beef and dairy products. This attitude keeps us focused on our long-term objectives.

     Economic recovery is predicted to be slow this year. Unemployment is expected to remain at 9% to 10% through the first half of 2010. Predictions are this slowly will improve from mid-2010 through 2011. The U.S. consumer holds the key to a rebound in beef demand. As the employment picture improves and consumer spending starts to increase, we all hope some of those additional dollars will go toward buying more beef.

     Expected growth in world population is bullish for protein demand and prices. We also look forward to a robust economy that will help the foodservice sector recover, increase domestic beef demand and enhance beef exports. Hopefully our pens and pastures are full when that time comes. Randy Blach with CattleFax would tell me to quit "guessing" where the market is going and focus on a margin. He says this is a key to success in today’s cattle business.