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- Cow-calf producers should continue to prosper for at least the next few years, as beef exports boom and national herd numbers remain low.
- Current good prices for their cattle should remain in that lofty range for two years or even longer.
- Beef production is still an industry requiring tough decision-making. That is unlikely to change, no matter what the price per pound may be.
Beef production is still an industry requiring tough decision-making. That is unlikely to change, no matter what the price per pound may be.
Erin Borror, U.S. Meat Export Federation economist, puts the added value per head at $204, still significant by any measure, and says beef exports totaled $5.35 billion last year. Big beef customers included South Korea, Egypt, United Arab Emirates, Russia, Peru and Chile, in addition to more traditional buyers like Canada, Mexico, Taiwan and Japan.
“The low exchange rate for the dollar kept us competitive in these markets, and the tight global beef supply was a factor, as well,” Borror says
Japan is expected to allow beef from 30 months old cattle into the country rather than limit it to 20 months due to BSE concerns. If that happens, U.S. beef exports should take another jump.
“We don’t have a timeline for that but the good news is, the process is underway,” Borror says.
“Their interest is not necessarily to help our beef industry but to change to help their own domestic industry. They’re looking to go to more the international level. Thirty months is the limitation in a lot of markets. Thirty months doesn’t create the paperwork challenge that 20 months does. Thirty months pretty much makes every animal coming out of a feedlot eligible to go to Japan,” Borror says.
Borror expects China to officially open the door to U.S. beef at some point but has no idea when that will occur. Since China has no cow-calf industry and little domestic experience with beef, she thinks the Asian nation’s food service industry will initially be the big customer.
“In China, we’ll be building beef from virtually nothing. What they’ve consumed is mainly pork. It’s a very exciting situation for us. We look at China as a blank sheet once we get access. The prospects are very exciting. We’re going to have to work on it. They don’t have a cow-calf industry and it’s going to be a stretch when, if ever, they develop one. Right now they have large almost U.S.-style packers but they can’t provide cattle to them,” Borror says.
That prospect intrigues many U.S. beef producers. “If we could just feed every one of the Chinese people one-fourth pound of beef, how much beef would that move? I don’t know exactly but it would be a lot,” says Dick Daugherty, the cow-calf producer from Alcoa, Tenn.
Additional Asian markets could put even more muscle behind U.S. beef exports.
“If we ever get Japan and China really on line, it will be astronomical. We’ll see prices increase even more than now just because of the supply and demand factor,” says Chuck Canter, loan officer with the Central Kentucky Agricultural Credit Association in Lexington.
Canter says lenders in his area consider beef industry loans to be good business these days. “We think these good times are going to continue for at least the next 3-to-5 years. It’s a supply and demand thing. The cow numbers are low. That means the price is high. The dollar is weak, so we’re going to see a lot of beef exports.”
The decline in the tobacco industry fuels much of Kentucky’s renewed interest in beef. “That’s why we want to get into livestock loans more and more. When I say livestock, I’m talking about beef, not hogs or horses or even chickens, and certainly not dairy. It’s beef cattle. Our ground in Kentucky is more suitable for cattle than for row crops,” Canter says.
An almost identical situation exists in Tennessee.
‘We’re certainly not afraid of cattle financing. We are geared toward the individual borrower. It’s all about the person with us. If the farmer is a good risk and wants a loan for cattle, that’s what we’re looking for. We have a lot of cattle customers, part-timers, mostly. We’re not making loans based on expectations in the marketplace. We’re making the loans on an individual customer basis,” says Johnny Sinclair, Farm Credit Service loan officer in Lawrenceburg, Tenn.