Dec 31, 2008

Quality is always a winner


Quality is always a winner

For purebred breeders and commercial cattlemen who sold calves early, it has been a pretty good year. Looking ahead is filled with a lot of uncertainty, but one thing about the food business is that there is always a market.

I don’t know how many purebred breeders have asked me— it’s been a lot—how I thought the bull market was going to be this next year. Frankly, I think it’s going to be pretty good. Not necessarily from judging by this fall’s sales, which were pretty darn good, but looking at the processing and inventory numbers which add up to needing more bulls.

This past summer when processing cows were trading in the mid to low $60s, processing bulls were trading for $75 and above. Boneless processing beef was in high demand and an extraordinary volume of cows and bulls went to markets. We have sent 400,000 additional beef cows and 50,000 more bulls to market in 2008 compared to 2007. This year, there was total of 610,000 bulls processed at USDA-inspected plants. Last year it was 554,000, and the year before that, 511,000 bulls were processed. In 2008, nearly 100,000 more bulls were processed than two years ago, a 20 percent increase in bull processing.

By my calculations, 50,000 bulls is enough to cover 1.5 million cows and heifers at 30 cows per bull. If USDA’s cattle inventory numbers are anywhere close to reality, the beef cow herd was down about 340,000 head last year and it looks like it could be down more than 1 percent in 2008, taking another 400,000 beef cows out of production.

And it doesn’t appear that there were all that many heifers carried over for breeding in the midyear inventory report. The number of bred beef heifers was down 6 percent from the prior year. This beef cow herd may be down to 32.9 million cows and heifers that have calved, and I would expect to see replacement heifers down another couple points. The point being that we’re still going to need bulls to breed that many cows. In some cases, 30 cows to the bull may be too high. I can sure see where there could be stable to greater demand for bulls this spring.

Looking back at the fall sales, you could still tell that quality bulls are selling for as much as ever. Cow/calf people are keeping their long-term breeding goals in the forefront and not sacrificing on breeding decisions.

The bred heifer markets have been pretty good and the ones with the better, proven genetics that were AI-bred to calve in 30 days or ultrasounded to calve in 15 days are bringing top dollar. All these cattle people are making long-term decisions regardless of the current economic situation. 2010 should be a much better year for cow/calf producers.

The Dec. 1 Cattle on Feed report told us that cattle marketings were down 9 percent over a year ago. Sounds pretty bad, but when you consider there were two fewer marketing days in November, it shows us that the daily marketing rate was not terrible.

In the big picture, beef production is actually down only two-tenths of 1 percent, while cattle slaughter is down a mere four-tenths of a percent.

The big glut of meat on the market is coming from the competing meats, pork and poultry. Mike Sands, an ag economist at Informa, said at a recent conference, “The worldwide demand for feed and food continues to increase as places like China, India, South Korea, and Hong Kong continue to grow in wealth.”

In the past two or three years, we’ve added around a billion people to the middle class. That demand on resources isn’t going away. People are going to talk about eroding beef demand, and that is still a risk, but historically, that’s concentrated to the foodservice industry while retail demand increases. Taken together, beef demand during recessions does not fare badly.

“To hold or grow that line over time, producers need to keep supplying consumers with the type of beef they’ve continued to crave. Consumers are accustomed to a certain level of quality and I don’t think they will compromise that,” said Sands.

There is a lot to be optimistic about this next year and if the industry remains focused on producing quality products, we should weather this storm well. I hope everyone has a happy new year. —PETE CROW