Editor's Notebook: The 'New' Normal

August 31, 2011 05:43 AM

KimWatson grayCattle prices continue to hold their own as we enter a new "normal" in this business. Along with cattle, prices for agricultural commodities across the board are higher, which translates into higher input and production costs. So while higher prices are good news, you still have to keep costs in check and make management and marketing decisions that will take advantage of the opportunities.

And there are many opportunities coming in the next few years. With growing exports and tighter supplies, this new normal will continue for a while. That means consumers will be paying more for beef at the supermarket and in restaurants. The question is, when will the prices move them to purchase other protein sources?

We’re already seeing a decline in domestic per capita beef consumption. Exports, however, will help buoy domestic demand and there are no indications that will slow down anytime soon. In fact, with growing overseas demand along with a weak dollar compared to our competitors, more U.S. beef will be moving overseas and across North American borders.

Wild card. Weather remains one variable that is out of producers’ hands. In some places, Mother
Nature has cooperated; in other areas, that’s just not the case.

In early August, I attended the Texas A&M Beef Cattle Short Course in College Station, Texas. I’m sure you can guess what the main topic of discussion was—drought...severe drought. Cattle ranchers around this area are in dire straits. It’s not just about culling the bottom or even the middle of the herd. Ranchers are running out of water, not just grass, so now they must decide whether to cull top genetics.

Some ranchers are exiting the business altogether, while others are sending cows to northern pastures, willing to pay the price of transportation to save what they have spent years building. Still others are shipping hay in at whatever the cost. Transportation alone is costing $90 to $95 per ton, and that’s on top of record hay prices.

It’s not an easy decision for anyone to make. When experts say the only thing left to do is sell the herd, it sounds easy, but in reality it’s tough when you’ve spent years to build a genetic base just to see the trailer being loaded for slaughter.

That’s the sad part of this market, that not every farmer or rancher can enjoy the current bounty. But eventually the rains will come, and the best plan of action is to have your ducks in a row to benefit from better prices.

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