Producer profitability: Livestock Marketing Association focuses on producers’ bottom lines; experts talk current market
The Livestock Marketing Association announced in September an initiative to strengthen producers’ bottom lines and incentivize the next generation of farmers and ranchers.
A “disturbing trend” consisting of “the continued loss of livestock producers across the U.S.” brought on the initiative. LMA sees this trend as a critical threat, not only to the livestock industry, but to the nation’s food supply, said the official news release.
Joe Goggins, the owner of Public Auction Yards, Billings, Montana, and a director for LMA said that grassland is being taken out of food production, for a variety of reasons – recreation, conservation easements and more. He also pointed out that a significant amount of grassland continues to be converted to cropland.
“We’ve got to get on an equal playing field where we have an equal shot at this ground,” he said. He pointed out that grain farmers or row crop farmers can usually outbid cattle producers for land, whether they are buying the land or leasing it.
“They can give three to 10 times as much for rent. To me a fair and equal playing field is as simple as this: A man or woman 25-30 years old goes into the bank and tells the loan officer they want to buy a green tractor and lease some land to grow soybeans or corn. It’s almost automatically approved. That same person goes to the same loan officer and asks for financing for two loads of heifers – it’s almost impossible. I don’t mind competition, I think it’s great, but I think it’s unfair right now,” he said.
But will the problem be solved when the would-be cattle producer is financed?
Goggins said there is another step: “I think we need to look at modifying some of the existing (federal) programs to put us on an equal playing field with the crop farmers.”
Although the idea of more government support isn’t a “pleasant conversation,” Goggins said an “equal playing field” is crucial.
“The farmer has federal crop insurance, if they wish to sign up. The bankers like that. They like knowing there is a base if something goes wrong with the weather, etc.”
He also believes that the industry needs to unify to tackle tough conversations to make the cattle business more profitable, more sustainable. “If we don’t do that, there will be fewer auction markets,” he said.
“Instead of taking two small towns to field a basketball team or football team, how many will it take? These rural American towns will become ghost towns if we don’t incentivize people to stay in business,” he said.
He said he wants to “go home and take a shower” when he thinks about a government prop-up, and added there could be unintended consequences and that he is open to additional ideas for achieving profitability.
With the cattle market that was relatively strong over the past few months taking a serious drop over recent weeks, the issue is a valid one.
Although prices have trended downward, he believes the cattle market should be in for some decent times.
“If we can weather this storm and keep the world from falling apart, I’m optimistic for those of us who own the factory,” he said.
“There is real promise ahead of us but there are things ahead that cause uncertainty. We’ll get through it, we always have. I think those of us in food production, especially beef and lamb, are in a good spot, but we have to have some things go our way. We’ve got to get some young people to stay in this industry, we have to convince people there is a tomorrow, and we’ve got to get proactive; we’ve got to do it together. This idea of fighting among ourselves is insane. I’m not saying we always have to agree but we’ve got to score, we’ve got to put the ball in the bucket, then you get some optimism again. I’ve got all the faith in the world that our best days are ahead of us.”
Goggins said he thinks the cow rebuild will be “the slowest we’ve seen on record.”
South Dakota’s Faith Livestock owner Dace Harper believes that the recent drop in cattle prices was caused by investors in the futures market, “who don’t have any real interest in cattle,” he said.
He believes the packing industry could be trading futures, too, and points out that those with enough investment into the “board” can impact it going up and down regardless of the actual cattle price or numbers.
Harper, whose auction market typically sells 150,000 to 200,000 head of cattle per year, also said the cattle on feed report last month which indicated more cattle on feed than expected probably caused nervousness in the market.
“I don’t see how it could have been that high,” he said, pointing out low cow numbers nationwide.
In his neighborhood, he said he sold about the same number of calves as he normally would this fall, but that tally included some ranchers who brought calves to town early.
And in the early months of 2023, many of his normal consignors brought to town fewer calves than normal.
“Down the road, at least in northwestern South Dakota our numbers are going to be the same or lower than a year ago,” adding that “if there is any fundamental left in the cattle market, we (cattle prices) should stay where we are or go higher.”
“What scares me is the fact that they can push it down so easily,” he said.
Ken Morris, a rancher from the Great Falls, Montana area, said in order to stabilize the cattle industry, some kind of insurance product could be helpful. He also believes market transparency is crucial, and he supports mandatory country of origin labeling and the OFF Act (Checkoff reform). He doesn’t believe a government subsidy is the answer. “That will make the packers even more consolidated,” he said.
Bryan Reed, an Iowa cattle rancher who feeds out his own calves also points to the October USDA cattle on feed report as possibly playing a role in the sharp downturn in cattle prices.
Reed mentioned imports playing into the figure, as well as the continued offloading of heifers.
According to USDA figures, the number of imported cattle from January through September of 2023 is 19 percent higher than the same time frame in 2022.
Females in the feedlot are probably also making the cattle on feed numbers high. “It’s just been the continued liquidation of the cow herd due to lack of profitability and age of cattle producers,” he said.
Reed’s area has experienced drought the past couple of years, but normally producers find hay or other feed, and tough it out. Now, those producers who continue to age are selling out.
Just like Goggins said, Reed points out that in his community in southern Iowa, competition from farmers and out of state interests (often hunters) buying pasture takes grass acres out of production.
Reed also believes that it’s possible that fewer small feedlots (1,000 head or less) are feeding cattle and so the cattle those small feedlots would have traditionally housed are now showing up in larger feedlots and thus are now included in the report.
Additionally he also blames futures investors. “To me, it shows how broken the cattle market is from outside money. They can fluctuate the board of trade so much with big swings one way or the other,” he said.
Harper said he distinctly remembers the high and then the crash in 2014-15. “I was helping out, going to sales. I remember in the fall of 2015, at every sale, they’d say they’d found the low. I heard that for a whole year until someone in the fall of 2016 was finally right, they’d finally found the low. We can’t afford to go back to 2016 prices again. That’s a killer.”
Goggins is optimistic for the coming months and years. “I think fundamentally the cattle market is in fantastic shape and demand for our beef is in unbelievable shape,” he said. “I think there is some real future for those of us that sell grass, that sell roughage – that are in the production level. We’ve got to get proactive, we’ve got to do it ourselves, to band together and unify,” he said.