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Looking Back at 2012-Drought and High Feed Prices Take Toll on Cattle Producers, Scott Dewald Says

Fri, 28 Dec 2012 16:25:56 CST

Looking Back at 2012-Drought and High Feed Prices Take Toll on Cattle Producers, Scott Dewald Says
Looking back, Scott Dewald, executive vice president of the Oklahoma Cattlemen’s Association, says 2012 was not kind to producers. He spoke with Radio Oklahoma Network Farm Director Ron Hays recently and says the continuing drought and skyrocketing grain prices delivered a one-two punch to the cattle industry in the Sooner state. Beef prices were up, but so were the prices of all the inputs, Dewald said. Livestock producers are trying to look forward to 2013 and make the best out of less than ideal situation.

Dewald says there’s simply no getting around the fact that 2012 has “been a tough year, there’s just no other way to put it. The drought has created a lot of problems out there for producers. They don’t have enough surface water. It’s just been a tough year. They’ve sold off a lot of cows. Our cow inventory is way down.”

While cattle prices have been on the upswing lately for farmers and ranchers who still have herds, Dewald says a lot of producers are worrying more about the price they have to pay for feed.

“When you’re looking at eight-dollar corn and ten-dollar beans, you’re looking at extremely high feed costs. Feedlots aren’t making any money. They’re draining equity. Our cow-calf producers are draining equity as they try to ride out this drought period. While prices have been good and we’ve been able, in some respects, to get paid decently for what we produce, fuel prices, fertilizer prices, tire prices, nothing is cheaper than it was before. It’s all more expensive-30, 40, 50 percent higher. It just makes it awful hard to make a profit in this industry.”

Dewald says the impact of those skyrocketing prices is being seen in the remaining cow herd.

“I think we probably have the youngest cow herd on record, the smallest cow herd on record because less mouths to feed is really important right now.”

Some market analysts are saying the rate of liquidation has slowed, with fewer culls crossing the scales. Dewald says that’s to be expected.

“I think that’s just an example of you got rid of most of what you had the first year and there wasn’t that much left to cull out the next year. That’s why I say we have the youngest cow herd, probably, on record.”

But, Dewald says, selling cattle had it’s good side in 2012.

“You look at all the purebred sales we had last spring and this fall. They were very, very strong. There is strong and good demand for good genetics. I think that’s because of the eternal optimism in the industry that we’re going to come out of this drought. We’re going to have to have young cows and bred females, so it’s not all bleak.”

Turning to 2013 and legislative issues on the state level, Dewald says his group its eye on several issues at the state house.

“I think the most notable is all the discussion about tax cuts and the possible elimination of income tax in the state of Oklahoma, doing away with tax credits, and possibly doing away with sales tax exemptions on ag inputs. To me, those are the big issues that can have the biggest impact on a person’s bottom line.

“Coming into this next legislative session which starts in February, we’ve been monitoring the situation there. There are only about 25 bills so far prefiled. The discussion will continue about possibly lowering or eliminating the income tax. And our fear is, of course, is if you do that how do you make up the difference? Will it be in increases in property tax? Which property taxes you pay regardless of whether you have a year like this year or a year like five years ago that was pretty profitable. And we’re going to have to keep a real close eyeball on that.”

On the federal level, Dewald says perhaps the biggest issue his group will be facing is the slew of proposed rules that seem to be issued by the day from various administrative departments. He said the Obama regulatory juggernaut will probably continue unabated.

“I think we’ll continue to be in a defensive posture as we look at proposed rules and regulations. There’s not a week passes by that there’s not two or three sets of rules that are proposed out of the administration. And it’s not just a Democrat administration or Republican. We seem to have a whole lot more rulemaking coming out of this particular administration that we have to respond to. Whether it be child labor laws, you know that’s one of those successful stories we had this last year, I wish we didn’t have to fight, but we did and the industry won; the transportation regulations that came down that we fought and won; the GIPSA rules that came down. I think we’re going to have to be ever vigilant as we come into 2013 and just watch very closely and be ready to respond accurately and succinctly as to why those things are detrimental to the cattle industry and, quite frankly, to rural Oklahoma.”

Another issue that will be getting attention next year, Dewald says, is the declining value of the dollar-a-head beef checkoff.

“The reality is that we don’t have as much money by today’s dollar value as we did back in ’86 when the original act was passed.   We just don’t have the purchasing power to go out and by TV. We don’t have the purchasing power to get in front of the consumers as much as we should be able to. And so I think you will see a move made for a possible enhancement to the checkoff. Will that be another dollar? Fifty cents? Will it be state by state? Those questions are yet to be answered. We saw Ohio try to do a dollar increase in their checkoff for state programs that failed. So we’ve got to be careful. Whatever we do has got to make sense and there’s got to be a succinct, quantifiable reason for doing it. I would tell you that the funds from the checkoff need to be enhanced greatly if we want to be competitive.”

Could Oklahoma pursue a separate state checkoff as well?

“Part of me really likes the idea and the notion that an organized, orchestrated national campaign with dollars behind it makes a little more sense than sporadic programs out there doing their own thing, so to speak. So, I tend to place a little more value on a national checkoff that is orchestrated, coordinated, and has a distinct purpose and goal in mind. That’s not to say that state checkoffs aren’t effective.   They are, but you’ll lose all that synergy of all those dollars coming together and trying to do one thing and that’s enhance beef demand.

“I would say if we’re not able to increase the national checkoff and make it more robust then, obviously there’s going to be more incentive to do it state by state.

You can hear the full conversation between Ron Hays and Scott Dewald by clicking on the LISTEN BAR below.


Scott Dewald recaps how 2012 affected cattle producers.
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