Tenn. and Ky. beef profits hit historic highs
BRUCE SCHREINER and RANDALL DICKERSON
NASHVILLE, Tenn. (AP) -- There's reason for optimism down on the farm, providing that's a beef cattle operation in Tennessee or Kentucky.
The mid-South states are the center of cow-calf beef production east of the Mississippi River. Kentucky ranks eighth nationally and Tennessee is ninth.
But while cattle prices are up and exports are climbing, a respected academic expert says the opportunity for quick profit may prove too tempting.
"We had record high prices this past year and yet we reduced the number by 40,000 (in Tennessee)," said Dr., Emmitt Rawls, professor emeritus of agricultural economics with the Institute of Agriculture at the University of Tennessee. "You kill the goose that laid the golden egg. It seems kind of ironic."
Industry officials also say it's a good time to raise beef cattle.
Mike Bach, a beef cattle producer in Bath County in eastern Kentucky, said he's preparing to sell about 80 heifers and 60 calves, either at auction or directly to a feed lot. It's looming as quite a payday for the 65-year-old farmer who has seen plenty of ups and downs in the industry.
"We never have seen prices like this," said Bach, president of the Kentucky Cattlemen's Association. "These are uncharted waters for the average farmer. And we just don't know where it's going to end."
Supply-and-demand trends seem to be working in the favor of producers. U.S. cattle herds are at their lowest numbers in decades, reducing the risk of an oversupply that would drive down market prices, Bach said. And with sky-high prices, many farmers aren't willing take a long-term gamble to build up their herds, he said.
"If you're getting $900 for an 800-pound heifer, why would you keep that heifer for another two years to get a live calf?" he said. "You're just taking a whole lot of risk there. And that's why the national herd hasn't expanded yet. These prices are going up and people are taking the safe bet selling them."
Dave Maples, executive vice president of the Kentucky Cattlemen's Association, said he saw calves weighing between 700 and 750 pounds fetching about $1,100 per head at a recent auction at Paris in central Kentucky.
"We've never had that kind of price," he said. "It's historical."
U.S. cattle and calf stocks totaled 90.8 million at the start of this year, representing the lowest nationwide inventory since 1952, according to the U.S. Department of Agriculture.
In Kentucky, the biggest beef-cattle producer east of the Mississippi River, the cattle and calf numbers totaled an estimated 2.15 million as of Jan. 1, down 40,000 from a year ago. There are just under a million beef cattle in Tennessee, plus calves.
In Tennessee, cattle and calves are Tennessee's top agricultural commodity, accounting for 17 percent of total farm income, or $545 million in farm cash receipts in 2010, according to Tom Womack, a spokesman for the Tennessee Department of Agriculture.
Charles Hord is executive vice president of the Tennessee Cattlemen's Association, based in Murfreesboro.
He says one of the reasons the beef production is appealing is that it can be done part-time. In fact, the vast majority of Tennessee producers have what Hord calls "town jobs."
"We have about 43,000 farmers and 80-90 percent are part-time," Hord said. "The average herd size is 25-30 cows."
Hord said the mood was upbeat at the National Cattlemen's Beef Association meeting in Nashville earlier this month.
"There's a lot of optimism right now," He said. "The outlook remains pretty positive the next couple of years."
Then, with a farmer's traditional caution, he added: "There are still concerns about rising costs."
Rawls said the mid-South region is well-positioned to do well in beef production. Relatively mild winters allow as many as nine months of grazing. The more cattle can graze, the less hay they must be fed and the less the cost of raising them.
Bach said he didn't start feeding hay and silage to his herd until December because mild temperatures and steady rain kept his pastures going longer than usual. That was quite a turnaround from 2010, when he started feeding hay to his cattle in mid-August as a severe drought dried up his pastures.
Production costs keep rising for fuel, fertilizer and other necessities, but the unprecedented prices are putting producers in position to reap nice profits, he said.
"We're way above our comfort zone," he said.
One potential risk is if producers increase their herds in hopes of cashing in on high prices only to see those prices drop in coming months, Bach said.
A concern both Rawls and Hord see is the rising age of farmers -- a situation not unique to Tennessee and Kentucky -- with the average age now in the upper 50s.
Some of the stock has recently come from Texas, devastated by drought the past few years.
Hord said he has talked with 10 to 15 farmers who have brought in Texas cattle and while he had no hard numbers, the anecdotal evidence is plain.
"When it hit, they (Texas producers) sold the worst cows," Hord said, but when the drought lingered they couldn't afford to hold on to the best ones.
"Tennessee producers were able to buy quality stock at relatively inexpensive prices," Hord said.
In Bourbon County, Ky., country agricultural extension agent Glenn Mackie predicted that the allure of high prices will spur producers to expand their herds in the central Kentucky county, even as some farmers turn pastures into corn or soybean fields. At the recent cattle auction in Paris, the 91-year-old farmer sold some calves for more than $2 per pound, Mackie said.
Mackie said the expectation of continued strong export demand for U.S. beef will be a big boost for cattle prices.
"Everything cycles and it won't just continue to go up and up and up," Mackie said. "There's a limit to it. And anytime you get high prices, you get more risk involved in the industry. So the people that are involved in it and willing to take the risk, they're the ones that are getting the payoff."
Copyright 2012 The Associated Press.