What can we expect with crop prices in 2008 and how will that affect livestock production?
Tom Troxel said Arkansas producers will have the advantage of being able to keep calves on grass longer, thus improving profitability. He said in the long run this is very valuable option considering the high cost we can expect to see with grains in 2008.
Troxel cautioned that the cost of hay will also be increasing because of the increase in fertilizer prices. “This will also put a major emphasis on hay quality. If producers are going to put up hay, and most will, they should harvest the highest quality they can."
Terry Griffin added from his perspective as a crop economist, “From what we’ve seen there’s been an increase of wheat acres in Arkansas, which is significant because it precludes those fields from being planted in corn or cotton. Cotton is the crop expected to decrease especially. Primarily, soybeans are planted after wheat. From two years ago corn production in Arkansas has increased, but for this year’s crop we’re still uncertain. One reason soybeans are attractive relative to other crops is because they don’t require nitrogen fertilizer applications; and urea is around $500 per ton.”
What will Arkansas’s cattle herd size be in 2008?
“We strongly believe that the cow herd in 2008 will be identical in size to 2007’s herd,” Troxel said. He cited, “The tremendous cost of fuel, fertilizer and grain prices, and the general increase in the cost of production,” as the main reasons for the steady herd size.
Grain prices will also promote softer cattle prices in ‘08, he said.
Troxel explained that for every $0.50 increase in the price of corn, prices drop $10 to $12 per hundred weight on calves weighing 500 lbs., and feeder calf prices can expect $6 to $8 decreases per hundred weight.
Will there continue to be more corn planted in Arkansas in 2008?
Griffin responded, “We’ve seen a huge increase in corn production in Arkansas in the last year compared to the year before. Corn has not been a dominate crop in Arkansas, but in the last few years it has been more dominant. But even with the increases, Arkansas is not producing nearly as much as mid-western, Cornbelt states. Locally, our cattle production in Arkansas is in the western portion of the state – in the Ozark Mountains – and some of Crowley’s Ridge in the eastern portion of the state. Corn produced locally could be better for local farmers even though historically corn in Arkansas is put on barges on the Mississippi river and floated down to the Gulf of Mexico.
“Even though Arkansas’s corn production is not significant nationally, the national increase in acreage could lower prices." Griffin noted that another consideration is the value of the U.S. dollar relative to foreign currencies. A weaker dollar makes U.S. exports worth more to farmers. Higher corn prices are are a good thing for farmers with the dollar low, but with imports for fertilizer inputs relatively expensive, profitability isn’t that great. "Input prices across the board are increasing as well,” he cautioned.
Troxel added, “the increase in corn also increases the supplemental feed costs. Feeds linked to the corn price will also be increasing in price. Producers need to be very careful to watch their break-even point. How much supplemental feed can they afford?"
In the long-run, producers may have to keep their calves on grass longer, and sell at 700 lbs. to increase profits, he noted.
How will international trade affect cattle pricing in the U.S.?
Troxel said producers can expect more beef on the market because carcass weights will be increasing in ‘08 as producers keep their calves longer causing them to weigh more when they enter the feedlot.
“With the economy the way it is, the credit crisis, the mortgage crisis, we question if the demand for beef will be a concern for ‘08 beef prices. Retail beef prices are at an all-time high, but given all the other things on people’s financial plates, can consumers continue purchasing the amount of beef as in past years? If we are able to increase exports to places like Japan and South Korea, we can maintain the demand and keep prices high,” he concluded.
