1/18/2014 7:00 AM
By Andrew Jenner Virginia Correspondent
WEYERS CAVE, Va. — With the price of beef hitting unprecedented highs in the past year, cattle producers in Virginia and beyond are likely making as much money right now as they ever have in their lives, said Jason Carter, executive secretary of the Virginia Cattlemen’s Association.
This week, in cooperation with Virginia Cooperative Extension, the industry group hosted a series of meetings across the state to deliver even more good news: Cattlemen can expect the good times to continue for at least another year or two.
On Tuesday morning in Augusta County, about 50 people turned out to hear Duane Lenz, a market analyst with Colorado-based CattleFax, talk about the 2014 industry outlook.
“The prices are going to be pretty bullish over the next two to three years, at least,” said Lenz, pointing to low cattle inventory numbers that will keep the beef supply low and prices high. The national beef cattle herd numbers about 29 million head today, several million less than a decade earlier, and far below the total inventory of nearly 39 million head in 1980.
In 2014, analysts expect the country’s beef cattle inventory to fall by another 300,000 head, followed by a very modest gain in 2015, Lenz said. Over the same period, he expects corn prices to stay around $3.50 to $4 per bushel, which he called a “very manageable” level that shouldn’t cut too deeply into cattlemens’ profits — this corn outlook could change if drought hurts the national crop.
Once the country’s beef cattle inventory begins to creep back up — three to four years from now — Lenz said he expects prices to enter a downturn. All things considered, however, Lenz assured the audience at the end of his presentation that now “is a pretty good time right now to be in the cattle industry.”
Lenz noted that a long-term challenge facing the beef industry is increasing competition from other protein sources such as pork and poultry. Some in the industry, he said, also perceive an increasing preference for these competing proteins among younger generations.
In response to a question from the audience, Lenz said strong beef prices could hurt the industry if they result in retail prices that are high enough to weaken demand. At an average retail price of around $5 per pound — significantly more than pork, $3.75 per pound, or broilers, $1.90 per pound — Lenz speculated that beef prices are now approaching a point at which consumers will opt for less expensive meats.
Jason Carter said afterwards that strong futures prices for feeder cattle offer very good opportunity for cow-calf operators to guarantee profitability. Buying futures contracts is very inexpensive, he said, estimating that a futures contract for $100,000 of feeder calves would only cost a farmer about $60. These contracts also guarantee a certain price but don’t lock producers into selling at that price. This means that buying futures contracts at some profitable margin above the cost of production will, at a minimum, guarantee a producer that profit margin while leaving the option open to sell at even higher prices, should they continue to rise.
“Cattle producers need to take advantage of the prices right now and also into the future to guarantee their profitability,” Carter said.
In addition to Lenz’s market outlook, the daylong seminar featured speakers on cattle reproduction, fertility and fescue management. Meetings featuring the same lineup of speakers were also held this week in Madison, Chatham and Abingdon.