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Ranchers may face tough times
Families eating out
less, but ground beef demand
rising
Tim Hearden
Capital Press
January 8, 2009
 |
| Ranchers watch as the Shasta (Calif.) Livestock Auction Yard holds its first cattle sale of the new year Jan. 2. |
A weak economy,
declining herds, wildly
fluctuating currency exchange
rates and the loss of key
markets overseas have made for
uncertain times in the cattle
industry at the start of 2009.
Higher feed and other input costs have led to a decline in the size of herds, as beef cow slaughter rose 13.8 percent in 2008. Competing meats such as turkey, chicken and pork have seen decreases in supply, too. Experts expect the herd cutbacks to continue through the coming year.
But the demand side is really "where the dark clouds are," said John Lawrence, extension livestock economist for Iowa State University and the director of the Iowa Beef Center.
"The weaker economy, high unemployment and all those factors probably hit beef harder than they do pork or chicken," Lawrence said. "A large amount of beef product is consumed through restaurants. That's a good-news-bad-news on beef. McDonald's burger places are doing really well. For family-style restaurants, the middle-income crowd and higher are eating out less."
Prices of rib and loin have actually decreased in the past year, while those for end meats typically used for ground beef have risen despite an increase of supply because of increases in cull cow slaughter, Lawrence said.
However, there's still a higher demand for ground meat as people "trade down," he said.
Among other factors that could affect the cattle industry this year is the strength of the U.S. dollar. A weak dollar in the first three quarters of 2008 made countries like Australia, Argentina and Uruguay more attractive places for global marketers to sell their beef, Lawrence said.
The dollar's dramatic comeback since October may increase imports from competing nations such as Canada, Mexico and Brazil while also hampering exports, he said.
"Those are two negatives on the demand side," he said.
Poor markets and high prices for hay and other inputs have made it difficult for producers to make ends meet, said Ellington Peek, owner and manager of the Shasta Livestock Auction Yard in Cottonwood.
"You can't make money selling a $600 yearling," Peek said.
Los Molinos rancher Dan Byrd, who has about 300 breeding-age cows on about 3,000 acres, remains optimistic even though cow herds in California have "almost been depleted" after two years of drought, he said.
The wet weather of the past several weeks have lifted hopes that producers will be able to rebuild their cow herds.
"The sale at Shasta (Livestock) a week ago ... was up substantially from the sales in the fall just because of the forecast of rain over a couple of days," Byrd said.
"A cowman is a different kind of guy. For the most part it has to happen before he believes it," he said. "I'm a different kind of guy. I'm very optimistic. We can build ourselves into a hole just from negative talk, and I won't fall into that trap."
One silver lining can be seen in recent increases in exports to Korea and smart risk management decisions throughout the industry, asserts Gregg Doud, the Washington, D.C.-based chief economist for the National Cattlemen's Beef Association.
U.S. beef exports to South Korea in September were $89 million, the most to any country during that month, Doud wrote in a report on the state of the cattle industry.
This illustrated "a testament to ... our industry's ability to bounce back," Doud asserts. U.S. beef imports were suspended there in 2003 after a case of "mad cow disease" was discovered, and the U.S. agreed in June not to send beef to South Korea from cattle older than 30 months in response to concerns over meat safety
Still, September's strong showing was partly due to the strengthening of the dollar against the South Korea's currency, the won, making it unlikely the feat would be repeated, Doud wrote.
"The fact of the matter is we're at an interesting place with the economic downturn," said Matt Byrne, executive vice president of the California Cattleman's Association. "Beef demand is still strong. The change has been that people are buying more hamburger and less steak."
Staff writer Tim Hearden is based in Shasta Lake. E-mail: thearden@capitalpress.com.
Higher feed and other input costs have led to a decline in the size of herds, as beef cow slaughter rose 13.8 percent in 2008. Competing meats such as turkey, chicken and pork have seen decreases in supply, too. Experts expect the herd cutbacks to continue through the coming year.
But the demand side is really "where the dark clouds are," said John Lawrence, extension livestock economist for Iowa State University and the director of the Iowa Beef Center.
"The weaker economy, high unemployment and all those factors probably hit beef harder than they do pork or chicken," Lawrence said. "A large amount of beef product is consumed through restaurants. That's a good-news-bad-news on beef. McDonald's burger places are doing really well. For family-style restaurants, the middle-income crowd and higher are eating out less."
Prices of rib and loin have actually decreased in the past year, while those for end meats typically used for ground beef have risen despite an increase of supply because of increases in cull cow slaughter, Lawrence said.
However, there's still a higher demand for ground meat as people "trade down," he said.
Among other factors that could affect the cattle industry this year is the strength of the U.S. dollar. A weak dollar in the first three quarters of 2008 made countries like Australia, Argentina and Uruguay more attractive places for global marketers to sell their beef, Lawrence said.
The dollar's dramatic comeback since October may increase imports from competing nations such as Canada, Mexico and Brazil while also hampering exports, he said.
"Those are two negatives on the demand side," he said.
Poor markets and high prices for hay and other inputs have made it difficult for producers to make ends meet, said Ellington Peek, owner and manager of the Shasta Livestock Auction Yard in Cottonwood.
"You can't make money selling a $600 yearling," Peek said.
Los Molinos rancher Dan Byrd, who has about 300 breeding-age cows on about 3,000 acres, remains optimistic even though cow herds in California have "almost been depleted" after two years of drought, he said.
The wet weather of the past several weeks have lifted hopes that producers will be able to rebuild their cow herds.
"The sale at Shasta (Livestock) a week ago ... was up substantially from the sales in the fall just because of the forecast of rain over a couple of days," Byrd said.
"A cowman is a different kind of guy. For the most part it has to happen before he believes it," he said. "I'm a different kind of guy. I'm very optimistic. We can build ourselves into a hole just from negative talk, and I won't fall into that trap."
One silver lining can be seen in recent increases in exports to Korea and smart risk management decisions throughout the industry, asserts Gregg Doud, the Washington, D.C.-based chief economist for the National Cattlemen's Beef Association.
U.S. beef exports to South Korea in September were $89 million, the most to any country during that month, Doud wrote in a report on the state of the cattle industry.
This illustrated "a testament to ... our industry's ability to bounce back," Doud asserts. U.S. beef imports were suspended there in 2003 after a case of "mad cow disease" was discovered, and the U.S. agreed in June not to send beef to South Korea from cattle older than 30 months in response to concerns over meat safety
Still, September's strong showing was partly due to the strengthening of the dollar against the South Korea's currency, the won, making it unlikely the feat would be repeated, Doud wrote.
"The fact of the matter is we're at an interesting place with the economic downturn," said Matt Byrne, executive vice president of the California Cattleman's Association. "Beef demand is still strong. The change has been that people are buying more hamburger and less steak."
Staff writer Tim Hearden is based in Shasta Lake. E-mail: thearden@capitalpress.com.
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