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It’s Still Good

Written by Dennis Sun

  Reading the latest cattle reports, the production side of the industry – which is where most of us fit in this region – is doing well. We may not see the great prices for calves we realized last summer and fall, but experts say it still should be good. Just be glad you don’t have a feedlot to buy calves for.

A DTN report said that by all indications, the good times are here for at least two or three more seasons if you are a cow/calf producer. Those words and the recent storms we’ve had lately are music to our ears. Precipitation has been spotty across the state, but around the Casper area we’ve had around 4.5 inches of precip since the middle of April. We hope that you are seeing the same kind of moisture.

On the other end of the industry, I can never figure out if the packers are making money. They never claim to, but some indexes show it to be true, and their stock keeps going up.  Because of cattle numbers, they have had to close some plants and cut hours in others, but if anyone has the cattle business figured out, it’s the packers.  

I like to see the feeders make a profit. However, if they do, it’s usually at the cost of the cow/calf producer. Feeders will no doubt show some resistance this summer to calf prices as high as last summer's since they are hoping to come out with a small profit. One feeder said, “We know the feedyard side of the industry is going to struggle for awhile as we fight over a limited number of feeders. We made some money in 2014, but right now, there is more money chasing cattle than there is sense.”

Early this year, USDA reported that the U.S. beef cow herd had increased 2.1 percent between January 2014 and January 2015 to 29.7 million head. While most felt that there was an expansion going on, not many expected that big of a rise in numbers for this year. 

Oklahoma State University marketing specialist Derrell Peel said, “True, it was bigger than most people expected, including me, but I don’t necessarily think this means the industry will see a big revision when economists look back at the numbers a year from now.”  

Peel said part of the reason for the large increase is just how low cowherd numbers had dropped and that the decline was beyond being part of the normal cattle cycle. Rather, it was forced on the industry by Mother Nature. 

Peel went on to say, “In 2011, we were at 31 million head of beef cows. I remember thinking that we were ready to expand. We were through the worst of the recession, the market values were there, and then the drought hit, particularly in the Southern Plains. That forced additional liquidation. We lost another 1.9 million head from that point on, and you can lay it directly at the door of the drought.”

Now California and Oregon have stopped liquidation, and there may not be many cattle left.  Australia and New Zealand are low on cattle, South America is stable, and Canada and Mexico are not bringing in as many cattle. On top of that, we at home have the youngest cattle herd ever. A cull bull at the auction may bring up around $3,000, and more rain is forecast. 

Sit back, prop your feet up, say a prayer and smile.