Profitability expected in cattle industry despite tighter margins
The CEO of CattleFax says the cattle industry is at a crossroads.
Randy Blach tells Brownfield the US cattle herd is contracting. “Prices are going up. Profitability – you’re going to squeeze margins for margin operators. You’ll finally get some additional profitability back into the hands of the cow/calf and seed stock operators, which is long overdue.”
But, he says, input prices are going up. “Two-dollar calves are breakeven. That’s how much input costs, cost of production has increased with record high hay prices, increased grazing rates, interest rates – all of these things – higher corn prices, the whole nine yards have had a major impact on our cow/calf producers.”
He says drought has been a factor. “We’ve been in a nasty, nasty drought in the last several years now. The beef cattle herd is down 1,000,000 head on January 1, 2023. That’s double the decline that we would have anticipated a year ago at this time because of drought.”
And, Blach says, margins will be impacted. “When you look at cost to gains, we probably averaged around $1.30 and we’ve got fed cattle prices that average in the mid to upper 50s for the year, there will be some margin there and there will be opportunities for us to manage risk.”
Speaking to Brownfield at the Kansas Livestock Association Annual meeting, he says packing margins are near breakeven costs.