Tuesday, February 12, 2008

Now for the tricky part...

The impact of ethanol mandates were immediately apparent for corn farmers, of course. Then it spread to soybean growers (although essentially the same group) and then began to work on every other crop in the US, for all intents.

The grain consumers began to be squeezed, and after what seems like a considerable delay (perhaps rooted in denial it was really happening) our US livestock industry is facing a massive sea change and beginning to alter course.

Nowhere is this impact going to be more profoundly felt than the cattle industry.
At the recent National Cattle Industry Convention in Reno, Nevada, all of this was being discussed at length, and it isn't necessarily a pretty picture for the future of beef producers. Consider a state like Missouri, the number-two state in terms of beef cow numbers with about 2 million head. Many of those cows graze pastures that potentially could go to row crops, particularly in the northern half of the state.

Even 30-bushel soybeans, at $12 a bushel, produce gross returns that are 50% to 100% higher than what a 500-pound calf will return (one cow/calf unit requires 2.5 or 3 acres of pasture and hay land).

Or look at it another way. Say you're the absentee landowner, and you've been renting the ground to a beef operator for $70 an acre. You hear about the price of corn and know your land could grow at least a 100-bushel crop. Which way are you going to go?

Not all beef cow states have this alternative, especially as you move farther west into range country. But they do in Missouri and sourrounding states. One cattle fieldman in Missouri worries that his state could lose 20% of its cows -- 400,000 cows! -- in the next year or two in the acreage war.

Cattle industry leaders say the industry will adjust and adapt, compete and survive. They're right, but it's going to be a smaller industry with fewer families involved. And that will be a shame. [More]
Even the glib assurance that the ethanol mandates will shift to cellulosic understates the cost to adjacent industries. The "unused" land often targeted for switchgrass is likely to be pasture or rangeland for cow-calf herds, for example.

Just as the grain markets have seen a surprising confluence of demand factors that have taken prices to unpredicted levels, I'll bet we're underestimating how these and unforeseen factors could drive meat, egg, and dairy prices as well. Of course, that will be done by constricting supply due to bleeding red ink.

[Side note: did you blink when you read MO was the #2 cow herd state? I sure did.]

2 comments:

Anonymous said...

John:

Regarding the surprise that no one knows that MO has the nations 2nd largest cow herd--you have no MO readers????--your readers just need to get out more---a MO native.

alan stirling said...

Pasture feeding is self executing but not the most productive land use compared to feed lots. The feces on the ground lose the nutrient value of managed manure and run-off gives the local enviromentalist a hissy fit. In large pasture management practice there is a lot of preventable loss that isn't found in a feedlot operation. Breedstock is not used to best advantage and rustling is becoming more organized and pervasive that ever before. Aprehension and convictions are difficult to get, and often plea bargains reduce it to a misdemeanor even when caught "red handed". A balance can be found that will keep the herd at marketable numbers while gleaning the benefit of the additional cultivation. Ultimately, the pasture quality can be enhanced through rotation and that leads to more live weight sooner. If you have ever been rustled, "where's the beef?" is more than just a marketing mantra for fast food hamburgers.