In The Cattle Markets

Authors:

David P Anderson, Ph.D

Texas A&M

Brenda Boetel, Ph.D.

University of Wisconsin

Kathleen Brooks, Ph.D.

University of Nebraska

Stephen Koontz, Ph.D.

Colorado State University

Glynn Tonsor, Ph.D

Kansas State University

Brian Williams, Ph.D

Mississippi State University

June 20, 2016

In The Cattle Markets

Glynn T. Tonsor, Associate Professor

Department of Agricultural Economics, Kansas State University

 

Future of North America’s Beef Industry …

 

I had the pleasure last week to provide a joint talk with Dr. Ted Schroder at the 2016 Beef Improvement Federation Annual Meeting & Symposium[1].  Our presentation sketched a broad vision of how the integrated U.S. and Canadian beef industry may look in 20 years[2].  To set the stage for our assessment, we outlined comparative advantages in comparing major global beef producers.

 

The key comparative advantages currently enjoyed by North America’s integrated industry include a strong trust and premium being placed on their grain-finished beef.  The presence of sound and effective infrastructure spanning from physical assets like transportation networks and sophisticate processing facilities to intellectual expertise on issues including genetics and meat quality, along with legal property rights supporting investment are additional global strengths.

 

Comparative disadvantages are equally important to assess and appreciate in assessing any entity or industry’s future.  The North American beef industry is not the lowest price producer globally reflecting differences in production costs not only relative to pork, chicken, and other proteins but also compared to competing beef systems around the world that are not as heavily focused on grain-finished production.  While these production cost differentials may well adjust, they seem unlikely to shrink substantially.  This reinforces the need to appreciate the fragmented nature of many inner-industry discussions and the associated partially effective coordination and signaling that occurs both vertically and horizontally throughout the North American beef industry.  One only has to examine debates around animal identification and traceability, proposed international trade deals, and generic advertising to appreciate this point and the associated challenges with pursuing immense economic opportunities with expected growing global beef demand over the next 20 years.

 

As noted in past articles specific to individual operations, identifying and effectively acting upon one’s comparative advantage is key for successful progression of any industry.  The core goal of this article is to have each reader pause and think critically about two things: 1) how the North American beef industry can best be positioned for success over the next 20 years and 2) how individual actions of stakeholders throughout the industry can help (or inhibit) realization of this success.  It is much more enjoyable, and arguably economically rewarding over the longer-term, to work together and “build a larger pie to share” than to focus on getting the “largest slice of today’s pie.”

 

The Markets

Cattle prices last week generally declined from prior week levels. The 5-area live fed cattle price for the week was down at $120.62/cwt while Nebraska yearlings traded lower at $144.92/cwt.  Corn prices were steady for the week trading at $3.96 in Omaha.




[2] Given time constraints we did not outline points specific to Mexico but those similarly warrant appreciation given ongoing adjustments in their beef industry and the historic connection of both beef and cattle trade with the U.S.