For those in the cattle business, this could be the best of times for the industry, despite low herd numbers. The genetics of the herd are good, prices are great and the state as a whole has grown to be one of the top cattle-producing states in the country.
There are a lot of reasons for that, including investments made by the Kentucky Agricultural Development Board over the past decade.
Those dollars have helped once-tobacco-dependent farmers diversify — not only benefiting the cattle industry, but the agriculture industry as a whole.
Jim Akers, the chief operating officer of the Bluegrass Livestock Marketing Group, said the cattle industry is still in a historic price range generally speaking, even though the market has backed down a bit over the past month.
“The market has settled back off the peak that we saw through the month of July, but we’re still selling calves a dollar a pound higher than we were at this time last year,” he said. “Obviously, this is the market and time the cow-calf guys have been hoping and praying for for years. If you can’t be profitable selling $1,200 to $1,500 calves, you probably need to think about what you’re doing.”
As high as prices have been, a small dip is not likely to be noticed. For the week of Sept. 6, a 335-pound feeder steer was selling for just above $291 per hundred weight in some markets.
Akers said while the recent drop in prices could be looked at as a minor market adjustment, the market went really high, and really quickly, in May, June and July.
“We were seeing record prices nearly every single day,” he said. “A lot of it was driven by outside investor money, and some of that money has pulled back right now.”
The summer season is usually slow in terms of the number of cattle being sold, but that was not the case this summer in Kentucky and elsewhere.
“We sold a lot of light calves and a lot of light yearlings, and what that means is there’s not going to be as big of a fall run that we would normally have,” said Akers. “We’re selling these animals earlier. Once they get to a dollar figure that is somebody’s goal, whether you’re a cow-calf guy or a backgrounder, you get to that dollar figure and they are pulling the trigger and letting them go.”
He added that by selling earlier, these producers could be foregoing some profitability by not hanging onto these animals longer.
“You hate that they could put just a little more into that calf and get it bigger, but you can’t blame them,” said Akers.
As quickly as the market has risen, Akers said a concern exists that it may turn the other way just as quickly.
“I think everybody is very concerned, because of how quickly this market made its move and got up to this level, that something geo-political or whatever could happen and crash it back the other way just as fast,” he said. “I’m not of that camp. I think it is as high as it is for good reasons. Is it a little too high? Probably, but there are significant, fundamental reasons why it got high.”
One of those reasons is the drop in corn prices, the main feed choice of cattle producers. From a market standpoint, when feed prices go down, livestock prices generally go up, as is the case in the present cattle market.
Akers feels that when the current crop is harvested and the market realizes just how big this crop is going to be, the current cattle market is likely to “hold its ground.”
Kenny Burdine, a livestock extension specialist at the University of Kentucky College of Agriculture, Food and Environ-ment, said not only have the cow-calf operators done well but so have the producers with stocker operations.
Those in the stocker business buy cattle after weaning and grass feed them to a certain weight or for a certain time frame before moving them on to the feedlot.
“A lot of our summer stocker operators who have bought cows in the spring with the intent to graze them during the summer have also had a good year, because those feeder cattle prices have gone up a lot,” said Burdine.
If there is a downside to all of this, it could be for those looking to replace cattle. They, too, are paying the premium prices. Another concern is the low overall cow numbers. Burdine said those numbers could go up, but it won’t happen overnight.
“If you look at what’s happened so far in 2014, cow slaughter is down quite a bit, and that is an indication we may be starting to see some expansion. Anecdotally, talking to a lot of my counterparts in other areas of the country, many of them are saying that producers in their areas, particularly in the northern and southern plains, are holding back some heifers,” he said. “My guess is as we start looking to 2015, I think it will most likely be stable. We’ve probably seen the end of the major declines.”
Many herd numbers have dropped due to drought conditions that forced producers to cull their numbers. While the eastern portion of the country has avoided dry conditions, parts of the West are still enduring historic drought circumstances. And what affects one part of the country agriculturally generally will affect the rest at some point.
Burdine said it will probably be a couple of years before any major increase in the cow herd is realized.