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Cattle Industry Update

Gene Johnston brings the latest info from the Cattle Industry Convention & NCBA Trade Show in Tampa.

-Hi, Jeff Caldwell here from Agriculture.com. Here with contributing editor Gene Johnston who just got back from the Cattle Industry Convention this year held in Tampa Florida. Gene let's talk a little bit about what-- what the mood was there at the con- at the convention, how are-- how are the cattlemen feeling these days? -Well, Jeff it's a mix bag. Cattle markets have been on a roll for about 3, 4 years in a row. Every year we set a new record high cattle prices. And it- it happened last year and we're probably gonna set another record again this year in 2013 because cattle numbers keep dropping. And I think the latest government statistics said were the cattle inventory was down 2 percent at the beginning of this year compared to last year. And so, fewer cattle - prices keep going up. The issue is- that would seem like, you know, record cattle prices every year - people making a lot of money, and it's true for some segments of the business. But every conversation at Cattle Convention seemed to be tempered by one word, and that was drought. -Yeah -And as- as you know we've had- 2012 was a bad drought for lots of places, but the year before that was a really bad time too for cattle country. If you think about cattle countries being the southern plains - Texas, Oklahoma, Kansas - those people have been in drought for much longer. And so, the- that's been really decimating to the cattle industry at a time when we should be rebuilding herds. -Are they, you know, we talked about this herd reduction. It's been going on for quite a while now. Do the- Do folks see that continuing in what's kind of a mood just industry wide considering that- that major variable right now? What's- What's the mood in- about all this? -Yeah, well, the mo-- the mood is good. I mean people there- people that go to Cattle's- Cattle Industry Convention. They're probably- they're people who are doing well. They're survivors. They've stayed in the business and their mood is good and they- they like where the cattle industry is. We're doing- they're doing a lot of exports, the world is commanding more beef, and the consumer market seems to be supporting the higher prices and the-- and the mood is good. They all will say, "If we could just get some rain." That's almost the way they end every conversation. If we could just get some rain, we could really be in cattle heaven. And so that's- that's- and nobody knows, you know,-- -Yeah-- -when that's gonna happen? The worst part of the-- of the drought to cattlemen has been in that southern plains area, and I'll just give you one number that I heard at the Cattle Convention. Texas is the number 1 cattle cap state and 2 years ago they had 5 million mama cows, beef cows in Texas, and they've lost a million head of those just due to the drought in the last 2 years-- -Wow. -A million cows have gone to market because they just didn't have feed for 'em. So that's 20 percent of their cow herd - in Texas alone - is gone. Some of that is being made up for by the fact that we do seem to be expanding the cattle herd in some areas, and it's mostly those that northern tier of states where they've tended to have better rainfall and the drought really hasn't impacted the cattlemen - in Montana, Dakota, parts of Minnesota. Those areas have had rain and I believe they say their cow calf numbers are maybe up 3 or 4 percent in the last year. -Wow.-- -Now, they're not as big- they're not as significant as Texas so, that wouldn't amount to a million cows to make up for Texas.-- -Surely.-- -But it does say the cow industry wants to expand and wants to fill what they see as a market void because of the cattle shortage, and it's just- if things go right, if the drought breaks there, if we get some weather- I think we'll be expanding this cow herd really soon. Now, that isn't gonna change the market situation for a while because when you start to expand the cow herd, that actually takes cattle away from-- -Yeah.-- -from the- the slaughter market. So, we're looking at good cattle prices for, you know, 2 or 3 years before we could even begin to think about actually producing more beef. -Yeah, yeah-- -Uh hmm-- -and I know it sounds like this is probably largely relative based on geography, but when the river hits the road and we're talking cattlemen are starting to talk about making plans in terms of, you know, their feeder numbers, and things like that for the next year. With this, you know, the 800-hundred pound gorilla on the road being the drought-- -Uh hmm.-- -how are people planning for how they will retain their positions in the marketplace-- -Uh hmm-- -with this major drought variable on background? -You know, that's a good question Jeff. I'm not sure I have the full answer to that one. A lot of the cattle that have been lost, it- it sounds to me like in talking to people at the Cattle Convention. It's- they're- they're older cattlemen in those places like we said in Texas and Oklahoma. They just said, "I think I'm gonna get out" - those guys aren't gonna be back. It would be- they're- they're probably the kind of people that are gonna retire and say, "That's it. I'm not gonna get the cows back." Now, will they be filled by other producers, younger producers, people who can expand and take over those acres? Don't know. Don't know, but- but I think it will happen, you know, when the market is in a very positive situation like these farmers, ranchers, they know- they know what the signal is to expand and- and profitability is the thing that makes them do that. So those that are still in the cattle business and still have hay supplies, and maybe still have some pasture - and hopefully will have better pasture production this year - those guys- they- they're gonna start retaining heifers. And they're gonna do it slowly, methodically but they're gonna build their cow herds and have a few cows every year. -Yeah. -We haven't even talked about feed cost because that is still a big issue too. Besides the drought, the other issue- the other negative to cattlemen is just the cost of feed. Primarily, you're talking about the cost of corn-- -Yeah-- -because corn is a driving influence and that's the seg- the segment of the beef industry that's struggling, as much as those cow guys are in Texas, is the feedlot people in the great plains. Because not only are they paying record high prices for replacement feedlot animals - the feeder cows - but they're paying the record high prices for- for feed too, and they're all looking for ways to cut feed cost. And one thing they're doing - and there's a lot of talk about this - is reducing the amount of corn in the feedlot ration-- -Oh yeah.-- -and you gotta replace it with something else. But there are some products out there that are using a lot more coarse distillers grains from the ethanol industry. They're using a lot more corn silage where they can get it and other-- -How about wheat? Are they- is there anybody talking about saving so much wheat?-- -Oh yeah there's a lot of wheat. Wheat, you know, if you look at the market, you know, corn and wheat are almost the same price right now-- -Yeah. -and that's an unusual situation. You don't see that often but it's- it's come to that now. And so, wheat is a good alternative. There's more wheat being fed, I know, in feedlot rations. One guy told me that it used to be that you figured to finish a feedlot steer, it took about 60 bushels of whole corn per steer. And now, he does that on 15 bushels of corn. -Wow -And it's not that he isn't feeding high energy stuff in the ration, he- you gotta feed them something to make them grow. It's just alternatives to corn, because corn is- is really that- kind of have that prohibited price level. And wheat, wheat would be part of that, but I think it's a lot of these other alternative feed sources that they find their by-products. There are lots of by-products out there and they're really scrounging around trying to find them to make the feedlot which were a lot of cattle going into a feedlot right now- a lot of them. They're looking at a hundred dollars a head loss right off the bat. Now, they're hoping the market maybe will respond a little bit and make up for some of that before they sell them. And that's why you'd put them on feed, but the fact is feedlot industry is just kind of barely hanging on right now because it's- it's all about feed -Yeah.-- -and feed cost. -Yup. -Well that's the business field with the eternal optimist, and we hope that they- everybody can hang on there -Right. -Gene thank you very much. Here with Gene Johnston who just returned from the Cattle Industry Convention for us at Agriculture.com. I'm Jeff Caldwell.