In early November (before the election) I had the opportunity to speak to the Rapid City Chamber of Commerce’s Ag & Natural Resources Committee.
Here is a recap of my talking points.
Ag Headlines
Presented by Codi Vallery-Mills, editor of The Cattle Business Weekly
What’s Making Ag News?
Election 2016
Volatile Markets
Trade
Land Prices
Election 2016
If Trump is elected he has Charles Herbster of Nebraska chairing his Ag Committee. Herbster is a Nebraska businessman and cattle producer.
If Clinton wins she has current Secretary of Agriculture Tom Vilsack as a good friend. If she wins it is likely she will move him up to a cabinet position.
Volatile Markets
SD cattle producers have seen a $500/per calf price drop from fall 2015 to fall 2016 sale season. Yet, hamburger in the retail stores is still at $5/pound. Where is the money?
Currently there are lots of different things adding together to create a volatile market.
Possibles are: CME electronic trading, packer owned cattle, greedy retail stores and the large protein supply on hand. Fact: 2016 beef production is forecast at 25.031 billion pounds. 1.271 billion pounds larger than last year and in 2017 that number is expect to go up another 913 million.
With down calf sale prices, what is Cattle Business Weekly expecting for prices in 2017’s bull sale season? Bulls will average $3000-$5000 and top end bred heifers will be $2000, with the rest lower.
Trade
China is now open to beef after 13 years. While this is good news it won’t impact the cattle market positively in the short term. Until China sets conditions and U.S. beef meets those conditions no positive impact will be seen. Likely to be 2018 before market is affected.
The first shipment of fresh Brazilian beef arrived in Philadelphia on Oct. 14. If we have such a large beef supply on hand why are we importing beef? USDA says we are able to export our meat at a high value while importing cheaper beef. Concern regarding Brazil is their history of Foot and Mouth disease and also of the countries surrounding them. While Foot and Mouth has an extremely low chance of being transmitted by fresh or frozen beef, is that a risk the U.S. wants? Interstate commerce could spread a disease rapidly and that concerns some cattle producers.
Land Prices
With the lower cattle and crop prices seen, there will have to be a reduction in land rental and purchase prices. As we all know there is also an aging group of farmers out there that are looking to slow down or do something with their land in the next 5-10 years. Now is the time for younger producers to get their financial houses in order and prepare to jump into the land market as opportunities will be presenting themselves.
What do we do with this information?
Banks – Be proactive. Don’t wait until your clients come to you. Get your ag banking philosophies aligned.
Retailers – Hold ag appreciation days
Restaurants – Serve more beef!
Dealerships – Offer incentive programs, new/used deals, etc.
Ag Producers – Be smart. Watch your bottom line and look for opportunities
Everyone Be A Mentor – Now is the time to build relationships with clients and take young producers under your wings.
“Do business with people who do business with you.” (It’s an old quote that we hear time and time again, but it’s a good one.)
– Codi Vallery-Mills