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February 02, 2012   Email to Friend 

Cash Cow: Bull Market Fueled By Short Supply
Debra Davis

Barbour County cattleman Tom Corcoran, left, and Federation Beef Division Director Nate Jaeger discuss strong beef prices that are tempered by high input costs for producers.
When Barbour County cattleman Tom Corcoran walks through his herd of beef cattle, his smile is a little broader than it was just a few years ago. The reason? Record high prices for the cattle he raises.

But it doesn’t take long for that smile to fade when he begins calculating how much more things cost him on his farm these days.

Throughout the country, ranchers like Corcoran are riding a trend of record-high prices for cow-calf farmers. Prices for a typical 550-pound calf and feeder calves, usually about 750 pounds, have reached a point that if farmers have the land, grass and desire to grow their herds, they can, said Alabama Farmers Federation Beef Division Director Nate Jaeger.

However, rather than expanding herd size, some farmers may choose to improve herd quality instead, he said.

“From production sales I visited in the fall, there was clearly a sizeable jump in herd bull prices compared with last year, but replacement female prices did not consistently follow the same trend,” Jaeger said. “This could be because it is taking farmers longer to recover from the drought we experienced a few years ago or because input prices have risen significantly, too, and they’re not as willing to increase fixed costs like they once were. Buying a better bull is a good way to improve a herd, especially if you’re retaining heifers.”

Either way, Jaeger said he thinks cattle numbers will stay about the same or a little lower in 2012 compared to 2011, adding that any expansion will be dictated by the weather.

“Barring any kind of radical change in our economy or export markets, increased demand coupled with tight supplies will mean cow-calf farmers have a good chance at being profitable again in 2012,” Jaeger said.

America’s cattle herd, with an estimated 31 million animals, is the smallest it has been since the 1960s, with additional declines expected when the U.S. Department of Agriculture releases updated numbers.
The latest losses in cattle inventory are a continuation of a 30-year trend, according to USDA reports. In 1980, 37.1 million beef cattle were on farms around the country, USDA reports.

Because of the drought in Texas and Kansas, cattle herds could continue to decline in numbers if dry weather hangs on into summer as most meteorologists predict. Weather affected Alabama cattlemen as well.

“Our spotty rain last summer resulted in some areas being drier than they were even in 2008, especially in lower Alabama,” said Jaeger. “That subsequently fueled the liquidation of more cows. The next biggest factor that resulted in lower cattle numbers was increased demand for lean beef. In 2011, more food dollars were spent on ground beef and end cuts rather than steaks and middle meats. This drove cull cow prices to the highest prices farmers have seen in quite some time.”

Increased exports of American beef also rose in 2011 with a record $5 billion in exports.

But high prices are mitigated by record-high input costs, said Corcoran, who farms with his brother, Walt, and his nephew, Liston Clark.

“We pay more for fuel, fertilizer, seed, equipment — everything,” Corcoran said. “We’re really a row crop operation that uses cattle to fill in the gaps. On land where we can’t plant a crop, we run cattle. In the winter, we plant a cover crop like rye or wheat to graze our cattle. That allows us to feed them from the field almost all year long and gives us an advantage over cattlemen in other areas of the country that have to buy grain.

“In the past, we saw our cows as a sideline, but they’re a money maker now.”


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