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Managing risks, preventing crises

By Staff | Mar 15, 2014

“The key concern I have is that cattle and hog prices are rising to record levels at a time when demand is typically a little soft.” —Dale Durchholz Senior market analyst, AgriVisor

CHEROKEE – Area livestock producers took advantage of an opportunity to learn how to better manage the current risks of the livestock industry, and solving problems to prevent crises.

The learning site was one of three Iowa Farm Bureau Federation-sponsored programs held Feb. 28 at Western Iowa Tech Community College, Cherokee, with Dale Durchholz, senior market analyst with AgriVisor, Bloomington, Ill.; and Brian Waddingham, Coalition to Support Iowa Farmers, based in Des Moines; among the day’s presenters.

Similar sessions were held Feb. 26 and Feb. 27 at Osceola and Independence.

Durchholz said his observations were candid.

“The overlying message (for producers) is that while there may be more short-term upside potential because of anticipation of tightening supplies of cattle, hogs, red meats in general, the downside risks are significant,” he said.

Durchholz cited last year’s declining consumer disposable income, high winter heating bills and the economic incentive to expand once soymeal prices decline as setting the stage for output, especially of chicken, to overwhelm a potentially diminishing demand that will affect all segments of the industry somewhat negatively.

“This is especially true for red meat producers in light of higher prices,” he said.

Any change in supply, Durchholz said, “will likely come” from the poultry segment with pork increases to come at a later date.

He said he also sees the beef industry slower to expand due to what he termed “the physiological parameters” to increase cattle numbers and supplies of beef.

“The key concern I have at the moment is that cattle and hog prices are rising to record levels at a time when demand is typically a little soft,” Durchholz said.

It is also, he suggested, a period when the hog supply is still relatively larger with the time approaching for a slow rise in cattle and beef supplies on a seasonable basis at a level under that of a year ago. The scenario is also one, he said, in which he sees hog producers able to hedge with futures/options to lock-in profits into their year end’s gains. These producers should, however, Durchholz warned, “use caution to not to let greed cloud” their decision-making process.

Queried on possible impact of land prices on livestock production operations, Durchholz said he sees these prices having “little direct impact” on the livestock industry. One reason, he said, is that land used for cow/calf operations as an example is not of sufficiently high quality to justify putting the acres into row crop production.

Looking at overall livestock industry picture, Durchholz said he expects the producers and ultimately suppliers to be most impacted in today’s agricultural climate those failing to pursue a risk adverse strategy in the face of earlier prices having moved to their record highs. Younger producers are “most at risk” he said as a result of their “generally higher” debt/equity ratio and other financial aspects of their operations.

“These producers need to look at strategies to more closely manage risks in comparison to the older and more established producers who generally have a higher risk tolerance and with this tolerance, a better risk-bearing capability,” Durchholz said.

Producer challenges and the need for producers to accurately interpret the various regulations and rules, Waddingham said, is a major reason for existence of the Coalition to Support Iowa Farmers formed by the Iowa Cattlemens Association, Iowa Corn Growers Association, Iowa Farm Bureau, Iowa Pork Producers Association, Iowa Soybean Association, Iowa Turkey Federation and the Midwest Dairy Association.

Assisting farmers with compliance to environmental guidelines is among the areas of challenges Waddingham suggested as he explained goals of the seven-member cooperative organization citing the fact that as of this time over 2,500 livestock farmers have received Coalition assistance since the organization was established in 2004.

“All livestock farmers need to be good farm managers today,” Waddingham said. “It doesn’t matter the type of livestock raised, how many head of livestock you have or what production practices you use,” he said. “The bottom line is that livestock farmers understand how to successfully and responsibly manage their operations.

“I believe all farmers want to follow the rules and regulations that apply to their farms, but with more than 200 pages of rules to follow, it can be challenging,” Waddingham said.

“Whether it’s helping farmers interpret rules and regulations, siting new livestock barns and feedlots, providing a ‘second set of eyes’ or bringing the next generation back, the Coalition is ready to lend a hand,” he said. “Our recommendation with regard to these rules and regulations in the environmental area for example is that farmers take a proactive stance.”

This proactive responsibility Waddingham added can include several on-farm steps for farmers to take for their added awareness of on-farm environmental conditions that might prompt concern or future governmental over-sight, among them the use of satellite imagery to observe the respective farms from the air. “

“It’s essential that farmers look at the entire farm, not only where livestock are housed, but at the feed storage area, manure stockpiles, compost areas and silage piles,” he said. “It is also good idea to walk around your farm during a rainfall or when snow is melting in order to address any concerns with potential run-off problems.”

Among the Coalition’s major objectives, Waddingham said, is to provide one unified voice for the livestock industry and agriculture, as well as offering group assistance to producers.

“Keeping livestock farmers on the farm and bringing new farmers into the business is a key factor in our existence,” he said.

“Be it through a phone call or personalized farm visit to meet with a farm family, our responsibility is that of standing ready to assist livestock farmers in a completely confidential, and at no-charge, way,” he said.

Waddingham said farmers with concerns or questions can contact the Coalition at www.supportfarmers.com or (800) 932-2436.

ditional speakers at Friday’s meeting held at Western Iowa Tech Community College included Christina Gruenhagen, IFBB lobbyist; and Dale Miller, director of research and commodity services, IFBF.

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