Cattle-Fax: Incentives for quality cattleWritten by Jennifer Womack
“This past year we averaged a little bit less than $120 on a 550 weight steer,” said Cattle-Fax’s Kevin Good in the company’s annual update to attendees at the National Cattlemen’s Convention attendees. “We think that will decline this year by three to four dollars primarily because of increased input costs.”
Grain prices, namely corn, take center stage in that conversation. Cattle-Fax’s Mike Murphy predicts corn prices will remain volatile in 2008. Of the 24-hour period leading up to his Feb. 7 presentation, he noted a five percent fluctuation in prices with corn trading at $5.29 on the Futures Board on Feb. 6.
Turning an eye toward profitability in the cow-calf sector Good said, “If he’s had grass he’s been profitable.”
Good said input costs have increased $150 to $200 per cow in recent years. “If we look at what happened relative to costs in this industry, hay prices have increased 58 percent, corn prices are up over 90 percent, pasture values are up 120 percent, crude oil prices up 150 percent and the list goes on and on and on,” said Blach. “We’ve been able to pass some of that increased cost on, but not enough.”
“We think it’s going to be narrower this year,” said Good of margins in the cow-calf sector. “Expansion is going to be hard to come by the next couple of years.” Weather, in addition to costs, are limiting expansion. America’s cattle cycle, according to Good, is on life support with numbers remaining constant for the past seven to eight years.
“As we look at the feeder cattle market for this year,” said Good, “we think it will average just a tick lower than last year. Last year it averaged, for a 750-weight steer, 106.5. We think we’ll back that off a couple dollars primarily because of higher input costs.” For the first couple of weeks this year, he said prices have average $95 on 750 weight steers, a number he expects to be close to the low for the year. Later in the year he said he wouldn’t be surprised to see prices reach the $113 to $115 range.
In the fat cattle sector, Good said prices averaged 92.5 in 2007. “We think we can do just a tick better this year.”
Cattle-Fax representatives noted opportunity for produces to increase their bottom line by differentiating their product and being mindful of quality. “The top end to the bottom as we go through auction barns is a $20 to $25 on the same weight on the same day because of the difference in quality,” said Good. “We think that differentiation of the product from the calf to the feeder to the fat all the way to the plate will continue to widen as we go forward.”
“One thing we have to remember,” said Blach, “there will be opportunities and things we can take advantage of.”