Ag economist cites statistics which point to ‘bright’ future for beef cattle producers

By LYNN MONTGOMERY | East Texas Edition

Sept. 15, 2005 - Beef producers gained details about increasing cattle numbers and current cattle prices, and how they are adding up for the future, from Noble Foundation Agricultural Economist Dr. Fred Schmedt. The ag economist was just one of the speakers who presented information during the recent 15th Annual Southern Plains Beef Symposium in Ardmore, Okla. 

Schmedt stated 37.8 million calves are expected to be on the books in the United States in 2005, according to the latest USDA estimates. This number is slightly up from 2004, but down from 2003, yet still relfects the growing cattle population, Schmedt cited.

One reason for continued growth is good cattle prices, which helps producers generate profit.

�There is good evidence after seven years of profits, there is (still) enough incentive to increase cattle profits,� he said.

When producers think about increasing their herd, and in turn, increasing their profits, should they keep their heifers for replacements, or should the just the older cows be retained for as long as possible?

Schmedt asked audience members: “With a show of hands, how many of you are holding back heifers? How many have older cows?” the economist polled the symposium crowd. 

�I think we have more older cows than we have had in previous cycles. I want to say 15 to 20 percent of the people who raised their hands� have older cows.

Economically, producers know they can sell a heifer for $500 to $600. It would cost more than that to retain her for a replacement, Schmedt stated.

�I think (today�s) cows are productive longer,� he added.

How did the cattle count get to where it is today?

Schmedt cited, “Demand is not a per capita consumption. Between 1979 and 1986, the falling demand of beef declined over 30 percent. Between 1998 and 2003, the price increased by 20 percent. The willingness to pay has been stronger and is growing.”

Currently, according to Schmedt, 700- to 800-weight steers are selling for $1.05 to $1.09 per pound. Fast forward to the fourth quarter of 2007, Schmedt predicts those same-weight steers to be bringing $.87 to $1 per pound.

The economist stated there are management factors, according to a survey, that will help the producer generate profits? These factors include land tenure (rent rather than owner), planting intensity (better utilization of fixed resources), adoption of technology (extremely important when it comes to national animal ID), controlling or reducing costs, higher yields and higher prices. 

�You want to do good risk management ... don�t get hung up trying to get the higher prices,� the economist cautioned the producers about hedging prices.�

He also stressed growth is very important.

�Very importantly, I think, is the growth of overall business operation. We as agricultural producers have got to grow.�

Growth could come in more than one way, according to Schmedt; such as increasing land base, increasing cattle numbers, diversifying with new enterprises, and/or diversifying with non-ag investments with off-farm employment. 

Schmedt stressed a real concern for producers is the “need to work towards a united voice in the beef industry to move the industry as a whole. We must have a strong united front.”

The economist cited some statistics. He asked which country has the most cattle? The answer is India with 330,250 million head. The United States ranks fourth in the world with 95,848 million.

Schmedt cited the challenges of a changing world order is “China, India, and the former Soviet Union are placing demands on world resources which are having an impact on the world today. Their entries into the world economy have doubled the global labor force, with little capital of economic value, and the ratios of global capital to labor has fallen by almost half.

�Pour all this together and look at what is truly being defined: Better product, taste preferences, society is fluent ... beef is expensive but affordable. The future is bright,� he concluded.