Looking Ahead to 2025: Beef Herd Expansion Smaller than Some Hope, Mies PredictsTue, 14 Jan 2014 16:30:21 CST
Forecasting the future is a very tough proposition and the farther out one tries to forecast, the less accurate it is apt to be. But, that is exactly the challenge given to Dr. Bill Mies, a retired professor of beef cattle science at Texas A&M University, who spoke at the International Livestock Congress-USA meeting in Denver, Colorado.
Mies tackled the trends that have shaped the beef industry to this point and projected where we might be in 2025 in the United States. He spoke with Radio Oklahoma’s Ron Hays following his presentation and said that a lot of industry insiders are hoping there will be a large expansion by then in the country’s decimated cow herd. (You can listen to their full conversation by clicking on the LISTEN BAR at the bottom of this story.) Mies said he is expecting some expansion, but it won’t be nearly as much as some expect.
“I think that when we look at the economic factors, the economic factors say that we’re going to have a very large expansion. But when you look at the logistical factors-the amount of land, the opportunity we have to graze on public lands in the West, EPA regulations on grazing lands in the East, the age of ranchers, the amount of capital that it takes in order to increase-all of those things will limit, I think. We will have expansion, but it will be limited expansion. I think as we get droughts and we don’t have droughts, as markets go up and markets go down, I think by 2025 we’re probably going to look at about the same number of cows as we’ve got right now.”
Mies said that one of the greatest threats to expanded animal agriculture is the EPA, especially in the eastern United States. He pointed to the tremendous regulatory burden put on beef and poulty producers, and dairy farmers in places like Florida and on up the eastern seaboard to Chesapeake Bay regarding point source pollution.
“As we look at people wanting to expand, they’ve got to expand with the knowledge that there’s somebody who wants to write a regulation to limit that expansion.”
And, if regulations weren’t an issue, Mies said tremendously-high land prices east of the Mississippi now and into the future also put a damper on producers’ ability to expand.
“To justify putting cattle on $10,000-an-acre land is going to be a very tough sell. And I don’t see people who are raising corn today turning it back to pasture to run cows even though there’s good economic signals for the cows. They’re going to leave that in crop land and continue to operate.”
Mies said that government regulations reducing stocking rates on federal lands west of the Mississippi will squelch growth.
“I think we’re kind of in a ‘If we do real good, we’ll hold our own’ kind of situation.”
He said that gains in productivity over the last several decades have allowed ranchers to produce more beef with roughly the same number of cattle. Slaughter weights have increased by almost 50 percent. Mies said such a tremendous jump in productivity in the future is simply not in the cards. Consumers even now are not looking for the larger cuts that come from larger cows, they are looking for smaller cuts. Mies said that trend will continue both in restaurants and at the grocer’s meat counter.
“Can we take these cattle even heavier to compensate for cow herd loss? I don’t think so. I think we’ve just about maxed out where we are and we’re going to have to get very innovative in how we fabricate beef in order to satisfy what the customers are asking us for.”
The news in the feedyard sector isn’t any rosier, Mies said.
“We built the feed yard industry in the late 60s, early 70s. We had 130 million cows. Today we have 97. And we’ve still got all of those pens. And we don’t have the calves to fill about 25 percent of those pens. And we need to run those feed yards full if you’re going to make a profit with them-or at least more than 50-percent full anyway. And so today there is intense competition to buy calves to keep your occupancy rates up which drives your risk up because you paid too much for the calves and then you’ve got $7 corn handed to you. And we’re trying to feed cattle and put them into the marketplace. And so the feed yards have been hit with a double whammy of low occupancy, high feeder cattle prices and high corn prices all at once in the last several years.
“The people who successfully used risk management lived through it. Some didn’t. My thesis today was we need to bulldoze down some empty feed yards so that they never see the light of day again and get the size of the industry more in line with the size of the cow industry.”
Mies said that packers have done a much better job of right-sizing when it comes to matching plant capacity to the available beef herd. He said they are now only about seven- to eight-percent overbuilt. He said they may need that much over capacity to allow for cyclical changes in beef demand and supplies.
“They have been realistic and have bit the bullet. And, boy, they didn’t want to. You know, you don’t want to shut a plant down and put 3,000 people out of work, what it does to that town, what it does to everything around it. It all weighs heavily on their decision. But they knew that the cows weren’t coming back. And they needed to do that. And in the feedlot business we’re going to have to make that same tough decision.”
Moving forward, Mies said the industry will also have to contend with those people who don’t like the modern methods of beef production.
“We have people who honestly-and sincerely-believe that any kind of technology and new technology is not good, that we need to go back to the old ways. When I’ve had person-on-person discussions with those I’ve tried to remind them that if we go back to the days that you’re talking about, the life expectancy was 58 years of age. And we’ve introduced a lot of new technology since then and we’re living to 82 or 83 years and, so, technology hasn’t been very detrimental to us at all.
“They honestly believe a lot of this technology is uncalled for and they don’t want to see it used on their product. Many of them are willing to pay a premium price to buy a product that hasn’t used this technology. And if they want to do that, that’s fine. I have no quarrel with that. There will be people who will produce that product and try to make money supplying it to them. And that’s fine. But for the mainstream American people, we’ve got to do a better job of convincing them that what we are doing is not evil, that what we are doing is in their best interests. This whole thing with beta agonists-beta agonists were developed to do what the consumer wanted which was to take the fat out of their plate and put lean it its place. That’s what beta agonists do. Beta agonists were the Holy Grail to win the war on fat. And now it’s ‘Oh, we shouldn’t be using beta agonists.’ Well, the price you pay is we make fatter cattle. And, so, where do you want to go? Where do you want the scales to balance? That’s the question that’s got to be dealt with. We’ve got to communicate that tradeoff to people so that they understand that there’s a consequence to saying, ‘Just don’t use this.’”
Mies said there are several changes he would like to see the beef industry make to carry it into the future. Chief among those would be an overhaul of the beef checkoff that was created in 1986 when the industry was different than it is today and that will be even more different in 2025.
“It performed for us. It did what we hoped it would do, but its time has come and gone and we need to retool that whole operation so that we can put the kind of dollars into this business that it deserves, that it needs to remain competitive.”
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