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Future is Bright?

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Well-known member
Feb 10, 2005
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Montgomery, Al
Cow-Calf Returns Look Good for Most Producers
Cow-calf returns are difficult to measure as individual operations vary greatly in terms of cowherd size, forage environment, management strategies, herd genetics, and marketing practices. At the Livestock Marketing Information Center (LMIC), annual estimated cow-calf returns are calculated as returns over all cash costs (including pasture rent), the estimated measure does not account for indirect production costs.

Cow-calf returns are estimated on a per-cow basis and represent a typical spring calving production system in the Southern Plains. Annual cow-calf returns reflect the cyclical nature of the U.S. cowherd inventory. Cow-calf returns typically improve during the early phase of cowherd rebuilding as tight feeder-calf supplies support higher feeder-calf prices. However, cow-calf returns decline as prices weaken in response to larger cattle supplies, setting the stage for the liquidation phase of the cattle cycle.

For example, in 1991, the estimated return to cow-calf producers was $78.29/head. Following that year, returns declined as the industry entered expansion. In 1996, the U.S. cattle inventory peaked and cow-calf producers realized a cyclical low return of a negative $89.55/cow. That was the biggest estimated loss for cow-calf producers since the LMIC series began in 1976.

In 2004, cow-calf producers experienced the most profitable year in three decades due to a combination of market supply and demand factors. From 1996, the number of cattle in the U.S. declined until 2005. Thus, prior to the discovery of BSE in North America in 2003, the domestic supply of feeder cattle available was tighter than in earlier periods and calf prices were already fairly strong.

The closure of the U.S.-Canada border further tightened the supply of feeder cattle, pushing feeder, fed and cull-cow prices to record levels in 2004. Plus, in 2004, it appeared the U.S. cattle industry was on the onset of a potential expansion phase as evidenced by a decline in the number of heifers available for slaughter.

Tighter supply conditions combined with robust domestic demand for beef pushed cattle prices to record levels in 2004. The annual average return for cow-calf producers in 2004 was estimated at $148.05/head, surging above all earlier estimates. On average, cow-calf producers gained almost $63/head more than the estimated return of $85.51/head in 2003 and an additional $141/head above 2002.

In 2005, cow-calf returns were just slightly below the record returns of 2004. The modest yearly decline was mostly due to high fuel and utilities costs as feeder cattle prices were once again above a year earlier. For 2005, the annual estimated cow-calf return was $139.11/head, a decline of only $7.83/head, in response to larger cattle and beef supplies, lower feeder and fed cattle prices, and continued year-to-year increases in fuel and energy costs. Still, by historical standards 2006 will be good for most U.S. cow-calf producers.

While, overall the cow-calf industry was profitable in 2004 and 2005, the feeding and packing sectors struggled, despite short periods of positive returns during the two-year period. A long-held saying is that seldom does everyone make money in the cattle/beef industry, seems to hold. The anomaly was 2003, which came about due to the cyclical state of the industry and some unusual forces related to international trade caused by the discovery of BSE in Canada in May of that year.
--Livestock Marketing Information Center

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