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Kentucky’s beef industry shows continued strength

Kentucky’s beef industry shows continued strength

Kentucky’s beef industry shows continued strength

Published on Jan. 31, 2008

While 2007 was a struggle because of low feed supplies, Kentucky beef cattle producers continue to enjoy strong demand for their products and strong prices. Feed costs will continue to be an ongoing challenge.

While high prices often result in an expansion in the cattle herds, little change in the overall herd size is expected in the coming year, said Lee Meyer, agricultural economist with the University of Kentucky College of Agriculture.

Meyer said while many economists are predicting an increase in production next year, he is not. Because of drought conditions in the west in 2006 and in this area in 2007, there have been some reductions in herds. Kentucky is the largest cow-calf state east of the Mississippi River.

“I think what we are looking at is some rebuilding of herds,” he said. “This will take some of the heifers out of the meat chain and put them into the cow chain. That’s going to pull production back a little bit and give us a pretty good upcoming year.”

Nationally, prices for feeder calves moderated somewhat because feedlots were dealing with high feed costs. But as corn prices leveled, the price of slaughter cattle increased along with the price for feeder cattle. Feedlots are Kentucky’s primary market.

Prices have also fluctuated in Kentucky in the past year, because farmers sold calves earlier and at lighter weights as pastures dried up. From June through October, sales were up between 45 and 50 percent. This hurt midsummer prices in the state, but those prices have rebounded as the year ends and are actually higher than a year ago, he said.

Those early sales will mean 2007 cattle revenue for Kentucky will likely be up substantially, Meyer said.

“We pushed a bunch of cattle to market that would have gone to market next year and we’ll probably have higher revenues this year with the pretty good prices we had,” he said. “But we are going to pay the penalty for that next year in terms of a drop in cattle revenues.”

Next year, demand for feeder calves and slaughter cattle will be strong, he said. Feed costs, although they are high, look to be relatively steady and that should help maintain strong prices. He expects prices to be similar to this year.

Meyer said it will take a couple of years for cattle numbers to build up enough to push prices down.

“I’d be very optimistic in the long run if it wasn’t for the feed situation,” he said. “With the ethanol demand for feed and the export demand for feed, feed remains a wildcard. A bad spring planting season or drought in the major crop production areas during the growing season could really push those prices up a lot. The result would be a major negative impact because if those feed costs go up, feeder cattle prices go down correspondingly. That’s the negative wildcard facing the feeder cattle industry, but other than that, the situation looks pretty good.”

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