Future bleak for beef industry unless changes are made, warns economist
By Tom Parker
Listening to economist Bill Helming talk forecasts and demographic changes and economic trends and growth rates and market shares and income streams and-above all-fractions and whole numbers and percentages is a lot like getting tossed into a commercial clothes dryer set to permanent press. At first the momentum is dizzying as you tumble and spin and bounce and whirl, but after a while the rhythmic regularity of the rotational force settles down into a disjointed equilibrium that’s actually kind of entertaining, in a vertiginous sort of way. More surprising is that Helming suddenly makes sense.
The good news is that your clothes come out wrinkle-free. The bad news is that Helming paints a fairly bleak picture of the future for the world in general and the beef industry in particular.
“Beef is simply too high priced,” Helming said. “Beef needs to become more affordable. Since 1946, the beef industry has lost 46 percent of its market share. Any business or major industry that has seen a decline like that ought to be reevaluating and thinking about what they might be doing differently to turn that trend around in a positive direction. The good news is that it can be done. The bad news is that the beef industry isn’t doing that so far.”
Helming, the first chief economist for the National Cattleman’s Beef Association, founder of CattleFax, the global leader in beef industry research for over 45 years, and now a self-employed agribusiness consultant and economist, will present his analysis of the immediate future of the beef industry at a two-day workshop on Monday, Sept. 21 and Tuesday, Sept. 22 in Topeka at the Ramada Inn, 420 SE 6th Ave. His “Reading the crystal ball of the beef industry future” will provide an in-depth analysis of the past and present state of the beef industry, followed by a sobering forecast of where it’s headed unless necessary changes are made.
“Economics of the Livestock Industry” will feature both Helming and and Jim Gerrish, co-owner with wife Dawn of Amazing GrazingLands Services LLC of May, Idaho. Gerrish’s experience includes over 20 years of beef-forage systems research and outreach while on the faculty of the University of Missouri, as well as 20 years of commercial cattle and sheep production on their family farm in northern Missouri. The University of Missouri-Forage Systems Research Center rose to national prominence as a result of his research leadership. He was also co-founder of the very popular three-day grazing management workshop program at FSRC, attended by over 3000 producers and educators from 39 states and four Canadian provinces, and the author of “Kick the Hay Habit” and “Management-intensive Grazing: the Grassroots of Grass Farming.”
While Helming convolutes data into complex webs of ideas, facts and projections before wrangling the unwieldy mass into a brilliant synthesis, Gerrish’s manner is more blunt. The bottom line for producers, he said, can be boiled down to a simple question: Are you in it for production or profit?
“There is a big difference,” he said. “Farming and ranching can only be sustainable if it is profitable.”
Between the two of them, there should be plenty of forage for thought and not a few hackles raised.
“Macroeconomics is very important as it impacts every business and industry within the U.S. economy,” Helming said.
Macroeconomics, from the Greek prefix makro (large), is a branch of economics that deals with the performance, structure, behavior and decision-making of an economy as a whole rather than through individual markets. Applying macroeconomics to the livestock industry provides some remarkable insight into its performance as well as its possible future, figures that can trickle down to the individual producer as well.
One of the biggest mistakes the cattle industry is guilty of is in the high cost of its product, he said.
“Four years ago, the typical coast-to-coast supermarket price for steaks was $2.49 per pound to $4.49 pound. It’s double that now. Beef is a very good product, it’s a safe product, but steaks are a lot higher in price. So is ground beef. The beef industry is making a major mistake by not figuring out a way to lower costs for making ground beef. It’s a staple and the American people like the product.”
The American people are also buying more chicken and other protein products, at the expense of the beef industry. During the past 39 years, consumption of chicken rose a little more than one pound per person per year, while beef consumption declined about the same amount. “That’s a gain for the chicken market,” Helming said, “but a loss on the beef side. The beef industry is not paying attention to the consumer. The consumer is going one direction and the beef industry the other.”
One solution would be to eliminate feedlots for cows destined for the ground beef market, he said. “We have a beef grading system in the U.S., and every animal that leaves the ranch ends up going through a feedlot and eating grain,” he said. “That just increases costs. We can produce quality ground beef without going through a feedlot.”
The truly astonishing thing is that Helming remains an optimist at heart.
For his part, Gerrish is a big advocate of eliminating hay production. While other processes can be implemented to make farming and ranching operations more profitable, most of them require time and effort to implement and manage. If there were one single quick-fix to put operations on the road to profitability, Gerrish said, it would be to get out of the hay business.
“It’s a quick solution-the only quick one, actually-but it’s a huge paradigm shift for many ranchers,” he said. “It does take some effort and will takes years to fully implement, but it can be done. Nothing changes overnight.”
In most ranching operations, a lot of cattlemen get hung up on weaning weights, he said.
“Less than five percent of the variation in profitability among cow-calf operations can be explained by weaning weights,” he said. “About 60 percent of the variation in profit is explained by differences in feed costs. If you can eliminate making hay, it’s the single most profitable change you can make.”
While Helming’s focus is on global markets and arcane economic figures, Gerrish’s focus is on the nitty-gritty details of a profitable ranching enterprise. Both of them , however, agree on a statement Gerrish made in a recent interview. “Too many operations have been focused on production, not profit, for far too long,” he said. “That has to change.”