US cattle industry told to modify market strategy
RENO, Nevada, Feb. 6 (Reuters) - The U.S. cattle industry must abandon business as usual and develop new marketing strategies if it hopes to prosper as the cost of raising cattle increases and the domestic herd shrinks, an industry official told cattlemen on Wednesday.
"We cannot continue to do business the way we have been doing it," Randy Blach, executive vice president of industry research firm Cattle-Fax, said in an address to the National Cattlemen's Beef Association annual convention in Reno, Nevada.
The NCBA is the nation's largest cattle industry trade group. Its members have watched the cattle herd shrink because of higher land and feed prices, fewer young producers entering the business, and severe drought, first in the southwest United States and later in the Southeast.
The U.S. Department of Agriculture last week reported the U.S. cattle herd at 96.67 million head, down slightly from 97.003 million a year earlier. Of particular interest was the calf supply, which USDA reported at 37.361 million head, the smallest since 1951.
HIGHER COSTS WILL HURT PROFITS
With fewer cattle, profits will be hard to come by, Blach said.
Production costs have sped higher because of higher prices for land, feed and fuel. To recover these costs producers throughout the production chain must add value to their animals to earn higher prices, Blach said.
That value would include documentation to prove the age of calves, feeding calves longer so they are healthy and strong when entering feedlots, and producing beef that would fit into higher-paying "natural" or "premium" beef retail programs, he said.
In Wednesday's audience was Jim McCann, a cow-calf producer from Miller, Missouri, who has already followed some of Blach's advice.
"We are reaping a profit by keeping records," said McCann, who estimates his age-verified calves bring an extra $30 to $40 a head at a nearby auction barn.
Age verification is needed to export beef to countries like Japan and South Korea, which insist on buying beef only from cattle of a specific age because of the threat of mad cow disease.
FEWER CATTLE, FEWER PRODUCERS.
As cattle herds have shrunk, the number of producers has decreased, due in part to high land values which make it hard for newcomers to enter the business.
And larger producers are seen as more efficient and can adapt to the changing market place, Blach said .
In 2006, there were a little more than 750,000 cow/calf operations, down from more than 1.2 million in the early 1980s. The producers that remain have increased in size. Continued...
