Ron Plain forecasts the road ahead
Ron Plain is a professor of agricultural economics at the University of Missouri. He analyzes beef
markets regularly for Today’s Farmer. We asked him to forecast the road ahead for beef.
1. What do you project for beef prices this year?
Last year we reached record high prices by a big margin, and 2015 will be another good year. The supply side should prompt continued strong prices; I expect a tad fewer cows to reach the market as producers save cows and heifers to grow their herds. The U.S. reduced its herd due to drought over the last few years, and there’s no way to grow the herd quickly. It takes about two and a half years from the time you save a heifer to slaughtering her calf. On the demand side, with the strong dollar, I’m not optimistic that exports will help prices much.
2. What do you expect as far as demand?
Retail beef prices have doubled since mid-2002, and Americans are eating less beef. In February, ground beef averaged $4.24 per pound nationally, and choice sirloin, $8.19. People are least willing to give up ground beef. We’re grinding an ever-larger share of the carcass; 42 percent was normal in the past. Today we grind 55 percent.
3. What about feed prices?
We saw the second record corn harvest in a row last fall, and feed prices continued to decline; $6 corn is a thing of the past. But if it’s hot and dry this summer, prices could change in a hurry.
4. How will the Checkoff’s Beef Quality Assurance program impact the industry?
BQA will play an important role in making sure cattle are well cared for and that we’re delivering a safe, quality product to the consumer.
5. What type of cattle will we be raising?
There’s a trend toward quality. Quality calves today are worth $800 the day they hit the ground, and people are willing to spend more on bulls and artificial insemination. As far as breeds, Black Angus has been leading for 25 years and that doesn’t seem to be changing.
6. What’s up with pasture?
We depend heavily on grass for mama cows. For several years now, many farmers have been converting pastures to crops to capture high grain prices. History shows that switching crop acreage back to grass takes decades. This mostly occurs when farmers get older and slow down; then they might consider converting marginal acreage to forage. However, I see pasture looking much better than five years ago. These days, people have more money to spend on fertilizer, controlling weeds and brush, and installing fences and water sources for rotational grazing.
7. If you were a producer, what would you do to reduce risk?
Grass is the primary ingredient in beef. I would ask myself, what could I do to improve forage and ensure adequate feed? Can I bale more hay, apply more fertilizer or plant better seed? Can I convert some pasture to a new nontoxic fescue variety, or rotate cattle through pastures with a variety of grass types to ease digestive problems caused by regular fescue?
8. What’s your best advice for beef producers?
These are the good old days. Prepare for prices to go down. Take today’s profits and upgrade herd performance through improved pasture and herd genetics.
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