What goes up must come down . . . A lot of experts are talking that the cattle cycle has hit its price peak and the dollar value we see for calves this fall will lower. Now before everyone hits the alarm bell let’s keep in mind that this decline is natural and should be expected – it’s called a cattle cycle for a reason. And it isn’t going to bring forth bottom of the barrel prices but rather prices lower than what we have been dealt the last two years. We all can agree the last two years have been downright outstanding in our part of the world. Prices going forward should continue to be good, just not as great as they have been. Some people point to our rapid herd expansion as the culprit of lower prices. Herd rebuilding has been significant but it’s certainly not complete. The U.S. cattle herd is at a 63-year low to due the West Coast, Idaho and parts of Montana being devastated by drought and fires the past two summers. Cattle producers have had to sell off cattle and that is leaving room for growth in other parts of the country – especially those regions that have received adequate moisture to produce feedstuffs. Domestic and international demand for beef as always, is needed yet. The economy is the United States is recovering and with it so are pocketbooks. Hopefully beef will be the protein of choice for those with a few extra dollars to spend. Your own personal promotion of beef or support of your State Beef Industry Council can help make the difference. Back to talk of cattle numbers . . . It will not surprise me to see producers in the Great Plains continue to hold back significant numbers of replacement heifers this fall. Some may or may not shed their older cows depending on how their own herd rebuilding has progressed the last few years.
With the amount of heifers already retained plus the potential for more, being a bull breeder should continue to be profitable into the near future. While I am optimistic that this drop in cattle prices is going to be slow and manageable for everyone, it should be noted that attention to debt load is needed. When I quoted Joe Morgan of Poky Feeders in a Cattle Business Weekly article telling producers to ‘Get their houses in order’ he mainly meant their finances. Debts and future expenses need to be penciled out and either paid off or saved for now. Ag lenders are definitely still lending money but they are doing so to the farmers and ranchers that have prepared balance sheets and loan use plans. Have your paperwork in order. Being smart with your money will hopefully help keep the cattle cycle looking more like a leisurely ride across the rolling prairie and not like a hike across the Rockies.
– Codi Vallery-Mills ©2015