Opportunities for the cow-calf sector
CattleFaxs Randy Blach tells producers to focus on production efficiency and coordinated market efforts to continue capturing profits.
BILLINGS, MONTANA (July 7, 2005) CattleFaxs Randy Blach acknowledged that the U.S. cow-calf producer is enjoying one of the most profitable times in history during his opening remarks at the general session of the Beef Improvement Federation (BIF) 37th Annual Meeting. But Blach also emphasized that the industry is poised to change, and he encouraged producers to prepare for the transition ahead.
One of the differences between the top one-third and the bottom one-third of producers according to net return is a $98 difference in annual cow costs, said Randy Blach, Cattle-Fax, during Thursday mornings session.
Its about as good as its going to get these last three months for the cow-calf producer. Weve seen the peak and are just starting down the slope, he told attendees, referring to upcoming cattle prices.
To that end, Blach encouraged producers to stay focused on the real nuts and bolts of what they can do better managing costs, improving production and enhancing performance.
He pointed out that data has shown a difference of as much as $100 per head between a high-return and low-return producer. Of managing those costs and optimizing market returns, he added, I think weve gotten sloppy the last couple years because margins have gotten so good. We wont be able to do that in the years ahead.
Looking ahead, Blach emphasized that producers also need to be aware of the numerous coordinated marketing programs that are available to them be it retained ownership, branded beef programs or alliances. Twenty years ago we didnt have all those choices. And, we are just getting started with the way this marketplace is going to shake out over time, he said.
He anticipates the trend for more branded beef programs to continue, and predicts in the next five to 10 years a move to 70% of cattle sold through grids/alliances. I believe thats where we are headed, and it will result in wider price spreads all the way back to cow-calf producers, he said.
As an example, Blach suggested producers watch video auctions during the next couple months. We are seeing more price spreads between those that have data and those that dont, and well see even bigger spreads the next four to five years.
Additionally, Blach said source verification and age verification will affect beef value in the time ahead. Thats something you need to be doing. I feel strongly about that. If those markets [exports] open up itll take an incredible amount of product to fill the pipeline, and therell be significant premiums in the short-term associated with it, he said.
On the point of trade, Blach stressed that lack of trade is something the industry has to fix. This is the part of the equation we must fix, and weve got to fix it now, he said. We are expanding the U.S. cow herd today, so export markets are going to be even more important to us in the next one to two years. We need to be able to trade.
Regarding demand, he added, Demand growth has been beneficial for the industry. The American beef industry is selling the same quantity of beef at 25% higher prices. Thats a pretty good business model. But, weve got to continue growing beef demand.
Blach also commended those producers participating in BIF, saying, You recognize being here helps you find an edge to be competitive in the U.S. and global market.
by Kindra Gordon, field editor, Angus Productions Inc._© Copyright 2005 Angus Productions Inc.
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