Mies explains the future direction of the beef industry moving forward
Denver, Colo. – Beef feedlot consultant Bill Mies spoke at the International Livestock Congress about the direction the beef cattle market is moving in and what the beef industry could endure in the next 11 to 12 years.
“The stars are aligned for expansion in the beef market, but they have been aligned for the last two years, and it hasn’t happened yet,” remarked Mies of Texas A&M University.
Mies implied, “We will see a modest expansion or recovery in the beef industry in the short years to come.”
Along with the expansion of the number of cattle that will be seen, there is also going to be a decrease in the amount of beef for consumers. The decrease is due to producers retaining more heifers in their cowherds, which will cut down on the number of cattle presented for slaughter and thus increase the price of meat products.
“Today, we are selling an upper level Cadillac in a Chevrolet market,” stated Mies. “If we retain heifers, there’s every chance we can sell a Lexus product in a Chevrolet market.”
Mies goes on to explain that if consumers are not completely satisfied with the eating experience of those high-priced beef products, the next time they are at the store, they are going to purchase a different type of protein.
Several of the influences to the high cost of meat are the continual rise in feeder prices and the decrease of calves seen in feedlots.
“We’ve got $1,000 feeder cattle walking in a feedyard,” said Mies.
Other contributing factors for an expansion to the beef market are the reduction in corn prices and the low debt that is seen in mature and financially stable ranching operations.
A major influencing aspect for the decrease in expansion with the beef industry is the rising age of ranchers.
“The older age is no longer compatible with the beef industry,” said Mies. “A lot of elderly producers are canceling their orders to purchase more cattle.”
Other aspects for a decrease in expansion are Environmental Protection Agency regulations, especially seen in the eastern United States, Forest Service and Bureau of Land Management restrictions to public lands and a continual fear of drought for producers.
“Producers in 2011 saw for the first time the range completely burned up and unable to support any life and complete dispersion of their cowherds,” explained Mies. “They have a fear now of paying $2,500 a unit to restock, and if that drought comes back they’ll lose their entire operation.”
It has been predicted that by 2025, there will only be a slight increase in the cattle herd to 97 million head due to restrictions of regional drought, urban sprawl and land values for other uses.
“If we were trying to start the beef cattle program in the U.S. from scratch today, we’d have cattle in zoos, not on ranches,” described Mies. “We couldn’t justify the cost of land today against the cattle production in this country as we know it today.”
Cow/calf operations will exist more on leased land in the years to come due to the extreme cost of land and because of aging ranchers leasing their property and selling their cows.
“We are seeing more small ranches with 100 head of cattle and a decrease of ranches with 30 head of cattle,” said Mies. “We are going to see more of this in the future and will witness a consolidation in the cattle industry, not necessarily with an increase in cows, but with a change in ownership of operations that can handle more cattle.”
Utilization of technological advances is going to intensify on operations due to the increased cost of production and surge in value of calf prices.
Producers have become more accustomed to technology and are more readily inclined to use new developments on their operations.
“Today, the cost of putting an implant in a calf prior to weaning is much more reasonable to producers than it was a few years ago,” explained Mies. “People are much more willing to stand costs of implants and pre-conditioning their calves because it sets them up for a premium price.”
Market channels are predicted to remain fairly consistent in the next 11 to 12 years.
An area where some consolidation is occurring is in auction markets. Numerous companies are starting to own their own market, if not two to three markets.
“We are seeing a lot of technological innovations in the auction markets. Examples include the number of auction houses that hold internet auctions with their normal auction operations,” said Mies.
The success of these auction markets has been great, he added, and it is predicted that the industry will see an increase in cattle purchases through remote locations.
Branded beef products
Branded beef products will continue to thrive, and the connection between ranches, feedlots and producers will strengthen.
Mies predicts the next challenge for the packing industry will be able to match supply with the requirements of branded beef programs.
The growth of branded beef programs has increased significantly and, with that, the differentiating of their products has become extreme.
“To maintain all of the different brands has become much more complicated than when it only used to be Certified Angus Beef,” said Mies. “Now there are between 52 to 55 different brand programs, and they present a challenge to packers everyday to make sure they fit all those brand descriptions.”
As more of the world moves into the middle class, there is going to be a greater demand for fed beef globally, specifically in China.
“The movement of people into China’s middle class is more than the entire amount of people in the U.S.,” said Mies.
With this substantial rise of people in the middle class, their need to upgrade their level of protein intake will lead to a higher demand in beef.
Mies stated, “The U.S. is the premier place to provide that beef to the world.”
Addressing capacity concerns
The feedlot business has suffered in recent years, and Bill Mies of Texas A&M University attributed that to an estimated overbuilding of them by 25 percent.
“We built the hotels when there was a lot more cows, to be exact 130 million cows. We now have 97 million cows,” said Mies. “There are a lot of pens and a lot of capacity, but the numbers to occupy those feedlots are down.”
Downsizing the vacant feedlots has been mentioned, but people in the cattle industry are trying everything to fill the unoccupied space.
Efforts of growing dairy heifers have been implemented in feedlots, but more action needs to occur.
The industry will also see changes made in the future and option contracts to update them from 1965 to incorporate the selling of heifers at slaughter.
“The current contracts are essentially a 1965 pickup in the year 2014,” said Mies.
The meat packing industry foresaw the decrease in numbers of cattle in years to come and have taken the steps to downsize their production capacity. However they are still seven to 10 percent overbuilt.