Is cattle back in black ink?
LYTTON – Driving through one of three cattle feedlots operated by Albright Farms, in western Calhoun County, Al Albright points to a pen.
“We sold some of those a few days ago at 1,200 pounds,” he said. “It’s lighter than I like.” But then again, the price was a dollar per pound, something that happens not very often.
In the past few months, cattle prices have staged a seemingly miraculous comeback. In December, finished cattle were $80 per hundredweight, now they are $100 per hundredweight. Calves were $1.05 per pound in December, now they are over $1.30 per pound.
On Wednessday, day feeder cattle futures for August closed at $115 cwt.
This is not only good news for cattlemen in general, but for Iowa producers in particular. Last week’s cattle on feed report has found that the U.S. cattle numbers were down 4 percent, but Iowa was up 3 percent over last year. Last January, Iowa moved into the fourth spot in the nation in cattle numbers, after spending years at No. 5.
The reason for the price comeback is clear, Albright said. A former director for the Iowa Beef Council and a national director as well, Albright said, “What we are seeing is a lot of trimming of the (U.S.) cow herd and a resurgence in demand. Those reduced numbers have a big impact.”
Albright Farms markets about 5,000 head annually. Al Albright manages his three feedlots on contractual agreements with two sons.
In addition, Albright said he did not think the price recovery was seasonal, adding that he thought the price would remain profitable for the near future.
Bryan Waddingham agrees. Waddingham is the director of industry relations for the Iowa Beef Council.
“I think it will be sustained for awhile. We should finish the year pretty strong.”
He also predicted that as the industry stands now, cattle prices could potentially average in the middle 90-cent range through the end of 2010.
According to Chris Hurt, an Extension economist with Purdue University, finished cattle prices are expected to be at their yearly highs this spring. Summer prices are expected to be in the low- to mid-$90s, with fall prices moving back upward several dollars.
For 2010, prices may average about $93, dramatically above the $83 of 2009. Prospects for 2011 should remain strong as well, perhaps moving close to $95 for the year, Hurt added.
Both Albright and Waddingham say that the evidence of a recovering economy is seen as consumers are choosing more steaks for grilling this summer. During the past two years, cash-strapped consumers were opting for the cheaper cuts and ground beef.
“That caused our valued cuts to drop in value,” Albright said. “But they want to get out and grill after the winter.” He said he’s hoping that consumers will be choosing more ribeye and T-bone steaks.
One aspect that was helping consumers’ choices was that retailers were holding the price for beef down, Waddingham said, despite the rise in live cattle prices. He explained that retailers were assuming the cost difference for awhile. However, the retail price has been sneaking back up, “but consumers are still buying the steaks,” Waddingham said.
U.S. and international consumers are feeling more confident, and they are competing for reduced meat supplies around the globe,” said Purdue’s Hurt. “Foreign consumers want more beef from the United States and from other exporting countries,” he said.
In the first two months of 2010, U.S. beef exports were up 24 percent. At the same time, U.S. beef imports from competitors like Australia, New Zealand, and Brazil were down 23 percent. The result of modestly smaller U.S. production with such strong exports and reduced imports is that beef supplies per person in the U.S. during the first quarter were down about 5 percent. Similar data for pork reveal a 6 percent reduction.
Cattle herds growing
According to last week’s cattle of feed report from the USDA, there were 1.37 million head of cattle on feed for the slaughter market in all feedlots in Iowa on April 1, down 2 percent from March 1, but up 3 percent from April 1 2009. Meanwhile, the nationwide cattle herd dwindled by 4 percent.
“Iowa has been going opposite the nation,” Albright said, when talking about growing cattle numbers. He said investment has returned to Iowa’s industry bringing more cattle into the state to take advantage of cheaper feed. The development of covered livestock facilities such as hooped structures and moni-sloped buildings has also brought in more cattle.
“Iowa is positioning itself to have a big impact on the cattle industry again,” Waddingham said. Back in the 1970s, Iowa led the nation in feeder cattle placements.
Cheaper feed helps
Waddingham noted that feed costs are lower for producers with depressed corn prices, and lower distiller’s dried grains.
Two years ago, when crude oil prices skyrocketed, making ethanol more profitable and bidding up corn prices, all livestock producers watched as profitability dwindled. But corn prices have dropped as ethanol plants geared back or stood idle after crude oil prices returned to traditional levels in 2009.
But most feedlot producers know that the money they are making, or will make with the cattle they have on hand will not be repeated as they refill their lots.
The calf market has gained in value by 25 percent in the past four months. “I may be making money on my cattle now,” Albright said, “but I’ll hard-pressed to make it pay after restocking.
“The cow-calf guys are on the receiving end.”
Nevertheless, investment risks are part of the producer’s life. “Some producers let it bother their sleep at night; but I don’t. There is a lot of risk and if it bothers you, don’t be in the business.”
Contact Larry Kershner at (515) 573-2141, Ext. 453, or by e-mail at firstname.lastname@example.org