Beef Market Advisor

Friday, February 22, 2008

Northern Plains Benchmark Herd Data

Since it is that time of the year when we analysis the production of our 2007 claves and start working on plans for the production of 2008 calves, I have elected to share a set of herd performance benchmarks from the Northern Plains. I wonder how your herd compares to these benchmark herds' numbers?

A question was raised as to what the letters in the column heading meant on the above benchmark table.

SPA = Standardized Performance Analysis -- measures defined in the published National Cattlemens BBeef Association SPA Standards.

CSF = Critical Success Factors

Double click on the figure to load a larger version of the table into your computer and then you can use your browser's print option to print out this benchmark table.

posted by Dr. Harlan Hughes 9:25 AM [edit]

Sunday, February 17, 2008

Price Forecasting -- Part I

Producer often tell me that one bottleneck to Strategic planning of marketing is not knowing which planning prices to use. Thus, I am sharing with ranchers my forecasting and marketing strategy evaluation techniques. It consists of two parts. First, I prepare an extensive set of planning prices for the next 12-18 months. Second, I enter them into an expanded set of enterprise budgets that project the gross income, resource costs and earned economic net returns for alternative marketing strategies. Due to limited space, this column will focus solely on the development of my latest set of suggested planning prices.

...more (click the "more" hotbutton to see the complete article in BEEF Magazine, January 2008.

posted by Dr. Harlan Hughes 3:53 PM [edit]

Price Forecasting -- Part II

Ranchings economics is changing. Preliminary data suggest the cost of running a beef cowherd has increased 15-20* in the list two years. Altered production costs and rising feed and livestock prices are generating a different set of ranch-level, cost-and-return (C&R) relationships. And it's imperative that ranchers have a good handle on their herd's annual costs and returns in this emerging biofuels era.
Ranchers must ask themselves: "Does the emerging biofuels era favor a different ranch-level production/marketing system?" If so, what is optimum for you?

….more click the "more" hot button to see the complete article in BEEF Magazine February 2008.

posted by Dr. Harlan Hughes 3:30 PM [edit]

Beef Cow Herd Liquidation On The Horizon?

Source: Cattle Network Today 2/15/2008

(Please note my editorial comment at end of this article)

Rising costs, and prospects for lower calf prices, could lead to the U.S. beef cow herd declining over the next several years. USDA's Cattle inventory report, released a couple of weeks ago indicated that the January 1, 2008 beef cow inventory was about 1% smaller than a year earlier. Most observers think drought conditions, particularly in the Southern Plains during 2006 and the Southeastern U.S. during 2007, prevented U.S. producers from expanding their herds the last two years. This line of thinking suggests that, if weather conditions return to normal, cow herd expansion is on the horizon. But the delayed expansion is not likely to turn into future herd expansion. The reason is simple.

For most U.S. cow-calf producers, there is simply no compelling profit motive to expand their herds. And rapidly rising costs, and stiff competition for pasture, are actually likely to lead to modest herd liquidation in 2008.

Kansas Farm Management Association data indicate that cow-calf producers' returns above variable production costs have been positive for the last nine years (including projected returns for 2007,actual 2007 data won't be available until later this spring), but the margin has been declining rapidly the last two years. And combining forecasts for lower calf prices in 2008 with a dramatic upturn in production costs, including higher feed grain prices, pasture rental rates, fertilizer prices, hay prices, and transportation costs, odds are high returns for average cost cow-calf operations will fall below variable production costs in 2008.

Recent cow slaughter data tends to support this view. Beef cow slaughter during 2007has 6.6% larger than in 2006 and, during the first five weeks of 2008, was nearly 10%larger than a year earlier. Total female slaughter (cow and heifer slaughter, combined) expressed as percentage of steer slaughter is running ahead of last year and at a level that suggests liquidation is taking place. During the first five weeks of 2008, female slaughter totaled 101.6% of steer slaughter, well ahead of last year's pace during January of 96.2%. So, one of the early by-products of the ethanol induced run-up in grain prices could well be the beef cow herd expansion that didn't happen!

Editorial comment from Harlan Hughes: While I totally agree with the general theme of this article, I suggest readers think about one more aspect of the beef industry as you read this. "The role of beef cows in U.S. agriculture is to harvest land that should not or can not be farmed." Beef cows have never really been able to compete with "farming" when that land could be farmed. The emerging biofuel era is again emphasizing that land that can be farmed will be farmed. The nations beef cow herd could well reduce in size due to the bio fuel era.

Now for the key point. The great-plains and mountain regions are not going to see this conversion from beef cows back to farming -- I think it will be the western corn belt and southern plains regions. As a result, the nations beef cow herd will move west in the biofuel era. Those remaining in the beef cow business will have less competition from the corn belt and southern beef cow producers.

posted by Dr. Harlan Hughes 11:45 AM [edit]

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