For the past several years, we at CALF News have asked feedyard managers to share their outlook on the industry’s future. Never in those years did there seem to be more issues affecting the industry as there are now. As one of our contributing managers said, “My crystal ball is a bit cloudy this year.”

With questions about the Farm Bill, corn prices, the lack of commercial feeding customers and feeder cattle prices, there are enough questions to go around. A good friend down south said it well, “I feel like a guy who took a duck to a cock fight.” Things have a way of working themselves out. Thanks to Bill Rhea, Bill Brandt and Andrew Murphy for their time and thoughts.

Bill Rhea
Rhea Cattle Company, Arlington, Neb.

Predicting what 2008 will bring to the cattle industry is complicated. Today, farmers and beef producers are on the verge of making truly independent business decisions without having to be at the mercy of government subsidies. More and more, agribusiness is going international with the value of the U.S. dollar, global markets and trade barriers factoring into even the smallest farms in the United States. 

Ethanol and corn prices
The dollar hitting an all-time low and crude oil prices up 59 percent – at $100 dollars per barrel – has supported the ethanol market. The 2007 energy bill will impact farm markets and cropping decisions for years to come, and it will have a tremendous effect on cattle industry economics during that same time. Corn-based ethanol production will be at 15 billion gallons per year by 2015. Doubling the ethanol capacity in seven years is possible and will help relieve dependency on oil. The question is: Can we grow enough corn to supply all the demand and have enough acres left for wheat, cotton and soybeans?

As more corn is funneled toward ethanol production, prices will rise and $6 corn is foreseeable. While higher corn prices make many farmers happy, the livestock sector will suffer. For feeders, corn may no longer be a feasible primary ration ingredient. This is comparable to what global wheat feeders found this year when the high wheat prices forced traditional wheat feeders around the globe to seek alternative feeds, resulting in record U.S. corn exports.

High corn prices will cause lighter finish weights, increased feedlot placements and a shorter feeding period. The first six months of the year will be tough as we adjust to these lighter carcass weights; the following six months should be better. This will impact not only beef production, but hog and poultry production.

Drought in key states
The drought in key cow-calf states weighs into our outlook for 2008. Prolonged drought will cause a decrease in cow numbers, which means fewer cattle coming to our feedlots. This situation coincides with the need to increase feedlot capacity because of lighter carcass weights. We’ll have to find feeder cattle somewhere to fill the gap or there will be a drop in beef production.

Global farming
We are playing in a truly global market with a weaker U.S. dollar. This brings complications in terms of outside competition for markets and products in the U.S. In the same right, it can bring a flow of business our way since our exports are more affordable to other countries. Politically we must press forward on opening markets to our meat products; increased access to markets in Japan, South Korea, China and other Pacific Rim countries is a necessity. We need torur increase our exports, which should be easier with the decreased value in U.S. currency. The opening of markets to Mexico, Peru and Russia has helped.

The biggest problem that remains, however, is attracting a new generation to agriculture.

Bill Brandt
Brandt Cattle Company, Brawley, Calif.

2008 is shaping up to be a wild year. Whether you’re talking about the cloudy national economy, the government assisting the ethanol craze, or even the environmentalists seeking to make our lives more difficult, expensive and nonsensical, uncertainties abound regarding the future direction of the livestock industry.

Personally, we stopped expansion in late 2007 and look to maintain a holding pattern for 2008. We are worried about the domestic consumer. The price that they will have to pay for beef in the store in order for the cattleman to break even or even make a slight positive return will be hard for the regular consumer to afford. This, combined with the inflationary pressures we are seeing in other consumer products, begs the question – Where will beef fit in? One way we have been able to insulate ourselves is by developing a branded program.

One thing that we are excited about is arrival of the global consumer. China, India and Russia have made incredible economic gains in the past couple of years and these consumers want American beef, and they have the money to pay for it. The cheaper dollar has only increased this demand. These protein-deficient global consumers have the potential to alleviate some of the current pains being felt in the U.S. beef industry. The only problem is that every time the U.S. government sends an “expert” negotiating team overseas, the results are less than inspiring. So, all I can say is, Hold on because it could be a wild ride. Best of luck in the New Year.

Andrew Murphy
Innovative Livestock Services, Great Bend, Kan.

It seems like yesterday that I was writing my outlook for 2007. Time has gone very quickly over these last months and it has been a wild year. However, most years seem pretty wild so I guess that we must now call them somewhat typical. Since the BSE issue in December of 2003, it seems as though the industry has been in somewhat of a lockdown mode. People have been tense, markets have been volatile and things have generally been negative from an economical standpoint. Here are the things that I think will be the center stories for 2008.

It’s an election year!
As my eight-year-old daughter has already learned to say, “Duh!” This is an obvious one admittedly, but as I write this we have had two primaries and two winners in each of the parties. This election could have one of the greater long term impacts on our business if we do not do our homework and position ourselves correctly. The lack of knowledge about what we do in all of agriculture is staggering. The other side is that I am not sure that they (being the candidates) are all that concerned. We need to remind them that if they’re not careful, they could drive the price of U.S. food too high to compete domestically. All I can say is that I hope the best candidate wins (or the least damaging).

We don’t have a farm bill … well kind of.
As we look to Washington, D.C., for some assistance in creating the next farm bill and we are sitting on the 2002 Farm Bill, it becomes obvious that the voice of agriculture is far from unified. This is the most concerning thing to me yet. The election in fact, albeit important, has far fewer implications than this in the immediate. Looking at some of the proposed amendments to the Farm Bill from some of our senators is scary to say the least. We need to look to our national and state organizations and get involved with this process. If we sit back and let the politicians decide our fate, then the outlook for the next years will be bleak. I know that livestock marketing has and always will be a hot topic in this business, but the bottom line is that we cannot let the government in any deeper than monitoring what is fair trade. They cannot be involved in creating the structure. We must treat this as we would any other issue and point to the facts. This is a surface fix that has implications that run much deeper than most people realize. I know that this is not the only issue, but it is one of the biggest. I urge you all to consult with your state and national organizations then make your voice be heard.

Exports
The big question is, Will this be the year? Four years removed from the BSE crisis, we may finally be making some good progress. However, we have believed this before, so cautious is an understatement. That being said, things this time have really shaped up very well toward opening the market. I hope that we can drive this forward and get back to business as usual. This market will be very important to us in the next few years.

Corn
Wow! This has been a fun one to watch. It has been wonderful to finally see commodity prices gain enough to help make the farmer more profitable than before. I know that this has dramatic impact on our own business, but if anyone has had it tougher than us, it’s the farmer. Even though the price of one of the biggest inputs has gone through the roof, it has some unintended consequences that can be economically beneficial. Lighter carcass weights and quicker marketings are always good for our supply issues. If we had an export market on top of that, I would say that it could get to be a pretty interesting year.

In general, I think that 2008 has the potential of being one of the best years in recent history. I look forward to watching an election shape up. I always enjoy a good discussion about the reasons for or against particular legislation. I am always willing to put my time in to help make the industry better and shape the future for the generations to come. Finally, I want to wish everyone a happy, healthy and prosperous New Year.