Nebraska beef producers set for another record year
March 19, 2012
In Nebraska, beef is king. Centrally located and a large producer of feedstuffs, this advantage has led to Nebraska becoming the number one commercial red meat producer in the country.
According to the Nebraska Beef Council, there are 20,000 beef cattle operations in Nebraska amounting to 1.88 million head of cows. On average, each operation has 94 cows.
It is also a large feeding state, with 5.1 million cattle fed and marketed each year from 4,570 feedlots. On average, there are 2.3 million cattle on feed at any given time.
“Its the state’s single largest industry and the engine that powers the state’s economy. The multiplied impact of the $6.5 billion in cattle sales each year is $12.1 billion. Cattle-related employment means income for businesses up and down main street in towns and cities across the state. In short, the beef cattle industry has an unmistakable impact on other economies in Nebraska,” according to the Nebraska Beef Council.
Nebraska is unique in beef production because there are more cattle than people. In fact, there are four times as many cattle than people in the state. The availability of resources is a huge advantage in terms of production.
“Nebraska has a unique mix of natural resources. Cattle turn grass from 24 million acres of rangeland and pasture, more than one half of Nebraska’s land mass, into protein and many other products for humans. The land grazed by cattle allows more people to be fed than would otherwise be possible. More than one billion bushels of corn are produced here each year, 40 percent of which is fed to livestock in the state. Cattle producing families, who make their living from the land, have a strong incentive to protect their animals and the environment,” according to the Nebraska Beef Council.
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The last year has been a good year for cow/calf producers, with calf and yearling cattle prices at a record high.
“The nation’s cowherd is at a fairly small level, and when I talk about production and inventory, I do so more so on a national scale. I’m talking about the big picture price trend,” said Jeff Stolle, Vice President of Marketing for Nebraska Cattlemen.
He continued, “One would think that we have reached price levels that would encourage some expansion in the cow/calf section, but expansion can only happen if mother nature allows it to. There was a lot of forced liquidation last year because of the drought. We have relatively tight cow numbers, and tight calf and yearling numbers, so both are seeing record price levels. There is more bunk space in the nations feed yards than there are calves and yearlings to feed in the bunk space. There is intense competition for those cattle now, and that is keeping those prices elevated for calves and yearlings.”
However, many cattle feeders and packers are struggling to make ends meet, due to high inputs of feeder cattle and feed. “The margins in the industry at this point are very good at the cow/calf level, and should remain so for the foreseeable future. However, it is thin at the feedlot level, thin at the packer level and thin at the retail level. Those will also remain true I think,” said Stolle.
As of Feb.1, there were 2.57 million head of cattle on feed, up 4 percent from February of last year, up 1 percent from January. The only other state to have more cattle on feed is Texas.
The biggest help to feeders and packers this year will be the export market. Beef export value per fed steer and heifer slaughtered was a record $206.37 in 2011, according to the U.S. Meat Export Federation.
“We are trading fed cattle out of the feed yards at very high levels. The export demand for U.S. beef is very, very good. We are exporting more than we were in 2003, before the BSE problem. This shows that our export trade has recovered. That is a big help to the market, especially considering the struggles in our domestic economy, which has dampened domestic demand,” Stolle said.
This rebound is extremely important to beef producers. “We have greatly diversified our beef export destinations and by doing so we have eclipsed the level of exports we had prior to BSE,” said USMEF President and CEO Philip Seng.
He continued, “By building new markets and steadily reclaiming the market share we lost in Asia due to BSE, we were able to approach the $5.5 billion mark in 2011 – that’s 1/3 higher than the 2010 record, and a very significant achievement for the U.S. beef industry.”
Even though feeders and packers may be struggling, they are not losing so much that they will exit the market. “It is almost impossible in my mind to speak of long term viability from a really general standpoint. It will tend to vary alot from operation to operation, depending on many different factors such as how it is capitalized, managed and the buying and selling of cattle. I feel like the producers here in our state are as well positioned in general as anywhere else in the country, and quite likely better than most,” he said.
Stolle doesn’t see the increase in the number of cattle on feed as a demand for Nebraska beef, but more because of the resources available. He said, “The cattle are finding the area where the resources are available for more production from areas that for one reason or another don’t have those resources available. It’s more so cattle finding the most economical feed source.”
However, this influx of cattle into the state will help the economy and the beef sector as a whole, just due to the sheer number of cattle that are being fed and processed.
“Beef is the biggest industry in the state. It’s always been a big industry here because feed is plentiful, water is plentiful, there is good grazing land and good crop land. A lot of the resources that it takes to support a thriving beef industry are and have been present in Nebraska for many years,” said Stolle.
These high prices for beef are good for beef producers, but it is a concern for consumers, who are struggling to make ends meet in the current economy. Beef prices in the grocery store have increased, and many consumers are moving away from high value cuts of beef in favor or cheaper cuts or cheaper protein sources.
“I hope the price in the grocery store won’t be an issue. However, from the consumer standpoint, I don’t see any relief from the prices they are seeing short-term. They will be steady to higher until such time that we rebuild the cowherd and there is more beef around, or production costs drop some and the product can be sold at lower levels. It’s a real issue at the retail level. We are fortunate the export demand is as strong as it is right now, because it allows feeders and packers to maintain a positive margin,” said Stolle.
Beef exports finished the year at 1.287 million metric tons valued at $5.42 billion. This broke the 2003 volume record of 1.274 million metric tons and easily surpassed the 2010 value record of $4.08 billion. Export volume was 21 percent larger than in 2010, with value up 33 percent, according to the USMEF.
“This outstanding performance in the international markets is exactly the catalyst we need to grow our cattle numbers. Nothing helps grow operations like a boost in profitability, and the success we are achieving is definitely contributing to producers’ bottom line,” said Seng.