Sands Urges Producers to Manage Downside Risk in 2015Thu, 26 Mar 2015 16:44:08 CDT
Feed costs are one variable factor in the cattle business that can make the difference between profit or loss. The severe drought a few years caused feed costs go to record levels. Corn was in heavy demand from the feeding sector, export demand along with ethanol production. Today abundant corn supplies have brought corn prices down substantially. Informa Economics Senior Vice President Mike Sands said those volatile feed prices have a huge impact on profitability.
"I think that's a critical part of this overall still cautiously-optimistic picture that we would paint for the cattle and beef industry," Sands said. "We need to see feed costs stay fairly stable."
While feed prices are certainly cheaper than the previous two or three years, they remain well-above historical averages. Looking at the 2015 growing season, Sands expects farmers to plant fewer acres of corn and yields may not be as high as last year.
"If that's the case, as we move into the next crop year, we do have the potential for reducing carryover stocks," Sands said. "That begins to paint a picture, not necessarily of dramatically higher feed costs, but probably not a lot of additional downside risk. But even stable feed costs at current levels won't necessarily be bad news for the beef industry."
Radio Oklahoma Network Farm Director Ron Hays caught up with Mike Sands at the Texoma Cattlemen's Conference in Ardmore Saturday. Click or tap on the LISTEN BAR below to listen to today's Beef Buzz.
In managing that risk, Sands said the principles of cattle production remain the same. He said cattle producers will need to control their costs, along with being more defensive on pricing decisions as the year progresses.
"We think cattle and beef prices are probably going to top out during the first half of the year," Sands said. "And as we get into midyear and beyond, it will become a little bit more apparent that supplies, I think, are in the process of growing and as a result our pricing and risk management strategies turn a little bit more defensive as we go into late 2015 and beyond. As opposed to where we have been the last couple of years."
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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