As a whole, the agricultural market has endured many changes and it’s been a difficult year for everyone. However, as the saying goes, “what doesn’t kill you only makes you stronger,” and 2010 has presented fresh opportunities for growth.
When discussions arise about the Ozarks economy and agriculture, talk of cattle seems to dominate the discussion – mostly because southwest Missouri contains the top three beef cattle counties within the state. In 2009, Lawrence County and Polk County ranked first and second, respectively, with over 45,000 head of beef cows each. Barry County ranked third in the state with over 40,000 head. With a staggering 6.3 percent of the total U.S. inventory, Missouri ranks second in the nation in beef cattle inventory – right behind Texas. Whichever way you slice it, Missouri is a beef powerhouse, and cattle prices are consistently on the forefront of most farmers’ minds.
Beef prices are rising lately – a statement that beef producers almost whisper in order to not “jinx” the trend. Since the first week of December, April feeder cattle contracts have risen. In December, the value was at $93.00 per hundred weight, and now is at $103.18 per hundred weight (based upon the Chicago Mercantile Exchange prices on Feb. 22, 2010) – an 11 percent increase in less than three months.
So, why are prices rising, and are the agriculture markets stabilizing?
There are many potential economic reasons, but the most logical is simply that when cattle inventories are at a three-year low, it doesn’t take a dramatic increase in demand to raise cattle prices to an acceptable level.
Cattle inventories across the United States have been steadily declining since the middle of 2006. Prices continued to fall during this time, as well, which would lead you to believe that demand was falling faster than the supply. Signs are showing that the economy is slowly starting to rebound, and with this recovery, it’s evident that beef is beginning to become a more prevalent choice among consumers. This is good news and – let’s face it – local farmers need weaned calves to bring above $1.20 per pound in order to give them the good living they deserve.
Although the economy is slowly starting to increase, it may take as long as three to four more years to bring the economy back to a level that is even close to what it was in 2006. Most people would prefer to not hear about a slow, steady increase in the economy, but it may simply provide the stable foundation we need to prevent another future recession.
Matt Kelley is a Senior Vice President with Old Missouri Bank in Springfield, Mo. Matt specializes in agriculture, FSA and SBA loans.
