As grain farmers struggle to make a profit in 2017, the cattle market has surprised everyone with a strong upturn.
A lot of factors have to align to boost a business enterprise and that has happened this year: the economy is stronger, increasing the demand for beef, grain prices are cheaper and export demand is good.
Feedlots have been making money, and the projection is the average profit per mother cow will be $69.00.
All sectors of the beef industry are still on the plus side, but it seems inevitable that production will expand and threaten profits in years ahead. A market analyst admits he was wrong in 2017 and takes a stab at how much producers may make in the year ahead.
Jim Robb is an analyst with the Livestock Marketing Information Center. Ron Hays, with the Radio Oklahoma Ag Network, interviewed Robb late last week.
2017 has surprised everyone, including Jim Robb of the Livestock Marketing Information Center, with a strong turn upward that has been measured in a recent report. The report weighed a variety of economic drivers relative to producers’ profitability prospects.
“We did expect up until a couple months ago, until we had this very strong rally in calf prices, driven by the overall marketplace – cattle feeders making money, export demand… a whole host of factors coming together – that this measure of profitability would be a negative this year,” Robb said. “But, the pleasant surprise in calf and yearling prices and rather low feed stuff costs, has turned that to positive – strongly positive.”
Good news indeed, Robb says, adding that this trend will help producers in the cow/calf sector manage their finances, with profits of nearly $70/head. While current prices aren’t quite as high as we have seen in recent years past, they are certainly better than those we saw last year. However, with larger calf crops on the horizon for the next couple of years, Robb cautions that this scenario could pose some profitability problems.
“These increasing supplies are still something the market will need to deal with and will be a driver in the margins, in the next two years ahead. And, we shouldn’t bank that we’ve cyclically turned higher on cow/calf returns,” he warned. “They’re still under some pressure from the supply side.”