The Joplin Globe, Joplin, MO

February 8, 2012

Cattle prices reach record highs as inventories drop to 60-year lows

By Andy Ostmeyer
news@joplinglobe.com

JOPLIN, Mo. — Just a few years ago, a 700-pound steer calf brought 60 cents a pound for Jim McCann, a cattleman who lives near Miller. Now, a comparable calf may bring nearly three times that amount, McCann said Tuesday.

Consumers may have noticed that already at the grocery store, where beef prices are pushing an average of $5 per pound and could continue rising in 2012, according to Ron Plain, an agricultural economist with the University of Missouri.

“There is not enough beef out there,” Plain said. “This year, there’s going to be less beef, more people, the supply is going to be tighter, and that means more records.”

The forces driving cattle and beef price increases are as old as agriculture itself: basic supply and demand.

“We have indeed seen all-time record highs for basically all classes of commercial cattle, within the last three months,” said Corbitt Wall, who oversees the regional market news program in St. Joseph for the U.S. Department of Agriculture. “Our inventory of cattle in the United States is the smallest since 1952. Our population is roughly twice as large as it was then.”



Exports

While cattle inventories are at 60-year lows, exports are pushing new limits too. Eleven percent of U.S. beef went to foreign buyers last year — a record — up from 8.7 percent in 2010.

Canada and Mexico are still the top export markets for U.S. beef. Tom Vilsack, U.S. secretary of agriculture, said Wednesday in a phone interview with the Globe that free trade agreements are opening up other markets, including those in Asia, where demand for protein is rising as incomes grow.

Vilsack said the USDA in recent years has “knocked down 1,500 barriers,” or trade restrictions, that were blocking access to overseas markets for American farmers and cattlemen.

“We are encouraged by the fact that Japan is rethinking its position,” Vilsack said, noting that Japan restricted access to U.S. beef a decade ago because of cases of bovine spongiform encephalopathy, or BSE. That haunted cattle markets in this country for years, but Japan is loosening up its stance.

Jackie Moore, owner of the Joplin Regional Stockyards, one of the biggest in the nation, said that while foreign markets are opening, cattle inventories are low for several reasons. He said that with the emphasis put on ethanol a few years ago, corn prices began climbing. Higher feed costs meant it was less profitable for cattlemen, who began to deplete their herds.

Now, he said, “Our exports are surging back to all-time highs. We’ve got to rebuild the cow herds, and that takes several years.”

In other words, he believes good times for cattlemen are likely to continue for a while.

“The next five years in the cattle business will be the most profitable for the producer in history,” Moore said. “The cow-calf man is in the best position he has been in history.”

But McCann, who has 200 head near Miller, doesn’t want consumers to get the wrong impression. Cattlemen aren’t getting fat. He said his chief input costs — feed, fuel and energy — have risen for him just as they have for everyone else.

A drought last summer in Texas and Oklahoma as well as Missouri also hurt cattle inventories, and prompted cattlemen to cull their herds even more.

“The livestock levels are where they were in the 1950s,” McCann said. “The profit margin is not quite as good as it was in the 1950s.”



Young cattlemen

Another factor affecting inventories is the average age of the stockman.

“The national average for a cattleman’s age is 60,” said McCann, who is 67. “There are relatively few young people going into it.”

The commitment, the hours, the costs and the risks — all have worked together to dissuade young people from a career raising cattle. And, regulatory hassles and pressure from animal rights groups and environmental organizations can discourage older cattlemen, McCann said.

“A lot of the older guys are saying, ‘I’m tired of fighting this thing,’” he said.

Vilsack noted the same trend, and according to the USDA, 30 percent of the principal operators of farms in the United States today are 65 or older.

Vilsack said the USDA’s Beginning Farmer and Rancher Development Program may offer a remedy for that situation. Beginning farmers, by USDA definition, are those with 10 years or less experience operating farms. Some of the biggest challenges for beginning farmers are finding an opportunity to buy or rent suitable land and having capital to acquire land of a large enough scale to be profitable, he said.

USDA loans and credit guarantees last year totaled nearly $471 million for 3,428 farmers and cattlemen in Missouri, and nearly 40 percent of the loans went to beginning or socially disadvantaged farmers and ranchers, Vilsack said.

For McCann, there’s reason to be optimistic. He said that even with price increases, the percentage of income that Americans spend on protein — be it beef, pork or poultry — is still the lowest in the world.

“The bottom line is the beef produced in the United States is far superior to anything else in the world,” he said.



THE ASSOCIATED PRESS contributed to this report.





Cattle counts



THE USDA recently put the cattle count at the beginning of 2012 at 90.8 million, down from 92.7 million last year and barely above the 88.1 million reported in 1952. In Missouri, cattle numbers, which have declined for six straight years, were at 3.9 million head in January, the lowest level the state has seen since 1958.