Cattlemen in an economic vice

Several factors largely beyond their control are making the cattle business for individual producers a very volatile, high risk venture of late. Supply fundamentals are very favorable for producers currently, as due to recent droughts and winter storms that killed large numbers of cows, there is certainly no surplus, and probably a shortage of market-ready cattle.

The other factors are not so favorable for cattlemen at the present time. Beef demand is an unknown, but probably weaker due to high energy costs, the mortgage market and unemployment. Consumers may well be buying down--chicken instead of beef, hamburger instead of steak, etc.

Three dollar gasoline is not just a problem for consumers. Running tractors down crop rows, diesel pumps for irrigation water and cattle trucks over the highways on $3.75 diesel have cost cattlemen heavily, without being able to pass the added costs on to the price of their cattle. Fertilizer for crops is largely made out of petroleum, and is much more costly.

Crop prices, and particularly corn due to ethanol production, are high and a costly input to making beef. It's great if you're raising and selling grain at these prices, but terrible if you are buying grain to feed cattle or running your crop through cattle instead of selling it on the cash market. The cash grain market is so good that pastures are being converted to grain production, to the detriment of cattlemen.

International trade offers great promise for cattlemen, but to date is largely unrealized. Regulations against U.S. beef due to BSE, political rivalries and the weak U.S. dollar all leave this market in a state of flux, with little impact on producer's current income.

On top of all this, is the lack of a Farm Bill and the increasing likelihood that there won't be one until after the 2008 election.
This breeds uncertainty, making ag financing hard to line up and adds to the difficulty of long range planning.

Fasten your seat belt, in order to ride out challenging times in the cattle business.