Daily News Update, Jan. 18, 2008

Cattlemen's Capitol Concerns: Ag economists wary of market trends

As thousands of cattle producers convene in Reno in February for the 2008 Cattle Industry Annual Convention, discussions won't just be focused on the Farm Bill and country-of-origin labeling.

Many U.S. cattle producers are feeling the pinch of rising feed prices and falling cattle prices. Economists across the ag sector are attributing this to a variety of factors that are hitting the cattle industry simultaneously.

"Right now the top concern among producers and certainly among our cattle feeders is the price of feed," says NCBA's Chief Economist Gregg Doud. "We're seeing new record prices for grains, oilseeds and other feedstuffs. The long-fabled 'beans in the teens' is now a reality.

When combined with USDA's surprising corn stocks report last Friday, the result is that corn futures today are above $5 per bushel through December 2010. This has directly contributed to a 17 percent decline in the value of feeder cattle futures since Labor Day."

Doud says the corn price factor combined with record pork production and the fact that we still do not have normalized trade with two of our three largest export markets, is hitting producers' pocketbook hard. Making matters worse are worries about the nation's economy.

"Suddenly the media is throwing around the 'r' word–recession," says Doud. "Beef producers understand that this is relevant to their industry because less disposable income means folks tend to eat out more and buy fewer cuts of meat. Fifty percent of domestically consumed beef is eaten outside the home."

When producers gather in Reno in February, Doud predicts they'll be talking about ways to manage today's extremely volatile markets and preparing for a much different marketplace than what they've grown used to in recent years.

"Things can change quickly in today's world," says Doud. "But coming up with solutions by thinking through these challenges, rather than just whining about them, is what makes the cattle industry different."