Growers’ Insights: Budgeting for Beef

Published in FSD Update

Rising prices not expected to thwart consumers’ love.

It’s good news, bad news for the beef industry. The bad: The drought has severely reduced feed yields for cattle, resulting in record-high beef prices. The good: Ranchers confirm that although they have many financial pressures, they’re not worried about consumer enthusiasm for beef waning.

According to the USDA, the drought will have less effect than originally anticipated; however, international demand for American beef is up, while our domestic supply is low and falling, with supply and demand not expected to balance out until 2014.

Currently in its fifth generation of operation, Haley Farms raises hay, soybeans, corn, wheat and cattle in north central Ohio. “Over the past 30 years the beef industry has increased its sustainability through efficiencies, allowing us to produce more pounds of beef per animal,” says Pam Haley, a cattle breeder with the farm. “Despite these efforts, prolonged drought conditions forced many farmers to drastically reduce the amount of cattle they raise, resulting in the smallest number of cows in the United States in over 60 years.” Haley notes that feed prices have almost doubled in the past two years, “forcing us to increase our beef prices in order to cover our costs.” 

Haley isn’t the only one feeling the price pressure. “Fuel for our vehicles is a big input challenge. Fuel also affects the cost of the feed for our cattle,” says Robin Coulter Lapaseotes, a third-generation rancher from Bridgeport, Neb., who spends hours in the saddle maintaining herds from horseback, as many ranchers still do. “We don’t set the [retail] price for our product, the market does, but we are greatly affected by our cost.” 

Laura Landoll, manager of public relations with the National Cattlemen’s Beef Association, says operators can monitor forecasted beef prices for the next 12 to 18 months via information from the USDA Economic Research Service Consumer Price Index. “What isn’t lessening is consumers’ love for beef,” Landoll says. “Our research shows that almost 90% of consumers say they plan to eat the same amount of beef or more in the next six months. The USDA forecasts overall food at home prices to increase 2.5% to 3.5%, and projects a 3% to 4% increase in beef prices in 2013.” 

Despite climbing prices, ranchers feel the outlook is positive. “I think the future of the cattle industry is awesome,” Lapaseotes says. “People love to eat beef, and we offer natural, organic and traditional products. Although we do face some challenges, such as low cow numbers, drought and high feed costs, we are such a persevering bunch who love what we do, which makes the future of our industry very positive.”

Future beef concerns

“People love beef, so demand isn’t a problem. Looking to the future, what is scary for us is being regulated off the land,” says fifth-generation cattleman, George Kempfer, whose family has worked Kempfer Ranch, a 25,000-acre spread located in Deer Park, Fla., since 1898. “We’re using the best management practices to preserve the environment, but the fact is it seems like a lot of people think we’re bad for the environment, and they don’t want cattle on the land.” 

Other financial concerns are based on managing people, not cows. “Trying to compete with other employers who can afford to offer insurance, benefits and paid time off for employees is another financial challenge,” Lapaseotes says. 

Kempfer is also concerned about the future. His children are assuming their roles as the sixth generation to work the ranch, but Kempfer says that inheritance taxes are steep and without thorough estate planning a ranch can be lost from one generation to the next.