Challenges and opportunities abound in the beef industry
October 23, 2012
As the old saying goes, 'Is your glass half full or half empty?' The perspective we have on life has a lot to do with how we answer this question.
It is no secret that the beef industry faces many challenges as we move forward. However, there are many opportunities out there as well. Here are a few for you to consider.
• Rising Input Costs. It is no secret that feed prices have risen considerably. Most other input costs (fuel, labor, animal health, etc.) have also climbed at similar rates. This increases the financial risk to beef cattle producers and the capital required for sustaining operations.
• Increasing Government Regulations. Local, state, and federal regulations and policies continue to increase in complexity, red tape, and bureaucracy. This drives up cost, exacerbates the frustration level and distrust in government, and ultimately, leads to people exiting the industry.
• Consumer Lack of Connection with Food Production. Even in our smaller rural communities, many residents are several generations removed from production agriculture. The resulting lack of knowledge about modern practices of animal husbandry, leads to misunderstandings regarding how food is produced. In addition, many consumers lack a basic understanding of science and, therefore, perceive all scientific advancements as potentially harmful.
• Lagging Investment in Research and Education. The federal government's diminished investment in agricultural research and, in particular, in livestock research has resulted in a slowing of scientific advancements in many sectors of our agricultural economy. In order to be prepared to feed 9 billion people in the near future, there must be a greater investment in agricultural research. Investments must also be made in education to train the next generation ofscientists, engineers, educators, and industry participants.
• Beef Export Value. The value of beef exports continues to grow. In 2011, the U.S. exported 2.788 billion pounds of product valued at 5.042 billion dollars or 10.6 percent of our annual production. Our major export destinations in 2011 were Canada ($1.03 billion), Mexico ($985 million), and Japan ($874 million). Export markets add value to the industry at the packing, feeding, and cow-calf levels and provide markets for beef cuts which have lower value in the domestic market.
• Rising World Population. The world population continues to climb, meaning many more mouths to feed. Some estimates indicate that world food production will need to double by the year 2050. Not all of this food will come from the U.S.; it will come from a variety of countries worldwide through improved production practices, education, and application of technology. The U.S. does, however, have the opportunity to play a major role in food production and in bringing our technological advancements to these other areas of the world.
• Rising Affluence. Improving economies and rising standards of living in many developing nations around the world mean more people with higher levels of disposable income. These are potentially new or increased markets for U.S. beef products.
• Cattle Inventories. Cattle inventories are at their lowest point in decades. As a result, cow calf producers will enjoy higher and potentially record high feeder calf prices over the next few years.
• Niche Market Opportunities. In the U.S., cattle producers have the option of participating in a variety of niche markets including natural, organic, grass-finished, and the emerging local foods movement. By expanding into these markets, beef cattle producers have the potential to tap into additional sources of revenue.
So, is your glass half empty or half full? There are a number of challenges which exist in the beef industry, but there are a number of opportunities as well. I hope you have an opportunity to contemplate these issues over a cup of coffee with your neighbor or give some thought to them as you feed cows this winter. They are definitely important and each of us needs to carefully consider what we will do next.