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Rocky Mountain Round-Up, or Worst of Times?

The biggest cattle show of the year will be
held this week, February 1-5, 2011, in Denver. It’s the Cattle Industry
Convention, the annual gathering of the National Cattlemen’s Beef Association
(www.beefusa.org/), with the giant trade show and endless meetings. They’re
calling it the Rocky Mountain Round-Up.
 

They could as easily call it “The Best of
Times, The Worst of Times.” The cattle business is experiencing record prices
for fed cattle right now, over $1.10 a pound for live cattle on the futures
market. But many of those cattle will lose money for their owners. That’s
because feed prices are also at record highs, with corn prices over $6 bushel.
Feed represents about 80% of the cost of finishing a steer.

And, calf prices aren’t nearly as strong as
fed beef prices. That’s because the high price of feed gets bid out of calf
prices. Cow-calf producers, with calf prices around $1.25 a pound, aren’t
reaping big rewards from this current situation.

As a result of all this, the nation’s cattle
herd is in a freefall on the inventory side, with fewer and fewer cows, and
cowmen, every year. From a peak of about 50 million cows in this country at one
time, and over a million herds, we’re now at about 40 million head, and 750,000
herds. Per capita beef consumption has fallen from 80 pounds to about 60.

As the demand grows for corn for ethanol,
chickens, and exports, the cowherd slowly dismantles. The survivors do well,
but there aren’t that many of them these days. In Midwest states, where corn is
an option for rolling pastures, the decline in herds is especially depressing
to cattle industry leaders.

The ethanol issue is especially irksome to
hard-core cattlemen, especially those in the West who can’t grow grain and have
to buy it (many Midwest cattlemen are corn farmers, too). Government ethanol
subsidies may be worth 40¢-50¢ a gallon to ethanol makers. Beef makers get no
such goody. Few beef producers speak openly of the inequitable situation that
puts them in when they compete to buy corn. They support the ethanol industry and
the energy independence it brings. So what they may secretly hope for is a
matching subsidy for the livestock industry, something that would put them on a
level field.

New government subsidies, even small ones,
probably won’t be on the table in this session of the U.S. Congress as it
strives to slash spending. So, current cattle industry trends probably won’t
change, either.

Of course, all of this will be resolved in
Denver (sarcasm intended). If you want to be heard on any or all issues, you’ll
just have to be there (www.beefusa.org/).

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