T
HOUGH THE NATION’S COW HERD HAS BEEN ON THE DECLINE since 1975, in the last 14 years the number of cattle fed in the U.S. has decreased by a dramatic
375,000 head per year. Moreover, thanks to Texas’ years-long drought starting in 2011, and the 2012 Corn Belt drought, more and more bunks have been empty. “Nothing good happens for a feedyard if there are
not any cattle to feed,” Anderson says, noting that in the last 6 years, 69 feedyards have either closed or shifted their focus to growing calves or dairy heifer development. Those yards represent 950,000 fewer bunk spaces. Nevertheless, it is not all bad news. For example,
Anderson says that in the U.S., producers are raising almost the same number of pounds of beef as they were in 1975 — with a lot fewer cattle. “For one thing, we are getting more calves per cow,”
he says. “And then we get those calves to the feedlot sooner and put more pounds on them.”
Quality over quantity Cattle are not just getting bigger, though. They are
getting better, Anderson says, and that is good news for those in the beef business, especially considering that during most of that time we have also seen an average or above-average Choice-Select spread. “What that means,” he says, “is that even though
we have gotten a higher percentage of Choice cattle than we used to, there is still a really good premium being paid for higher quality cattle.” He says branded beef programs drive some of that
value creation.
“The biggest brands are growing and so are the oth-
ers,” he says. “We are putting more branded beef in retail stores and restaurants than we ever have before. That is a way to create more revenue per animal if the brands do what they say they will.” That last part is key, he says, explaining that the
brand is essentially a promise of a good eating experi- ence. Those that deliver create loyal customers, and loyal customers will mean higher demand. Anderson believes a focus on quality could be one
of the best ways to increase profi tability in the future. He uses the car business to make his point.
SOMEBODY WILL FIND A WAY.” I ABSOLUTELY BELIEVE THAT IS THE TRUTH.
“In 2014, the U.S. auto industry made 16.5 million
cars and sold all of them. Suppose there was some constraint saying that they could only make 1 million per year in the future. What would they make? Would they make small, low-cost vehicles or big, expensive vehicles? If they can only make 1 million, they are going to be focusing on Escalades and King Ranch Expeditions. “We are the same way,” he says. “We can only make
28 million head, so we better make the highest-valued fed cattle we can make.”
More value, more risk High-dollar cattle as the norm change the game,
though. It now takes more money to get in the business and to stay in it. It also increases the risk. “That changes the nature of our relationship with
lenders, with our other capital suppliers. That changes the way we do things,” Anderson says. “We have to ask ourselves some questions, and I do not know the answer to all of them. Who is going to own the cattle? What rate of return will they demand? How much risk will they accept? How much more will it cost? What happens when the higher interest rates inevitably ap- pear? What role will packers play in the whole process?” In an earlier session, an audience member asked
Dr. Derrell Peel, Oklahoma State University Extension economist, who would take over now that ranchers were getting older and fewer young people owned cows. Anderson loved the answer so much that he repeated it. “Dr. Peel said, ‘If there is money in it, somebody will
110 The Cattleman September 2015
thecattlemanmagazine.com “IF THERE IS MONEY IN IT,
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132