A bright spot in a gloomy outlook

Hoard's Dairyman: 

A bright spot in a gloomy outlook

Date: 
Fri, 12/24/2010

Between a forecast for lower milk prices and the likelihood of higher feed costs, it’s hard to not have a gloomy financial outlook for U.S. milk producers in 2011. Sorry. Amid the dreariness, however, is the near-certainty of one very bright income light: cull cow prices.

America’s beef herd is at a record low level and faces what analysts expect will be a long and slow rebuilding process. Corn prices over $6 per bushel aren’t helping in any way, shape or form, and oil prices over $90 per barrel won’t let corn prices (thanks to ethanol) go back down. Meanwhile, foreign demand for beef is vigorous.

Dairy producers, of course, are also beef producers, albeit on a small scale in relation to total market supply. Cull cow sales account for only a tiny share of their total income, but there’s little doubt that cull animals will be generating more dollars than ever before next year. Here’s what Derrell Peel, Cooperative Extension Livestock Marketing Specialist at Oklahoma State University, had to say earlier this month about the beef price outlook for 2011:

“Cattle and beef markets across the board have jumped sharply in the past several weeks and both Live Cattle and Feeder Cattle futures prices suggest that the industry is in for an extended period of largely unprecedented cattle prices.”

Unprecedented is a word that’s seldom seen in forecasts of any kind, let alone in agriculture. This time, for once, it is connected to a positive financial item rather than a negative one. Beyond simply more income, discretionary culling opportunities driven by high beef prices will also be a valuable herd health and genetic improvement tool for dairies.