Posted: Thursday, February 07, 2013 12:00 PM
Ranchers need to be ready to react to sudden swings
By DEBBY SCHOENINGH
For the Capital Press
LA GRANDE, Ore. -- At the top of economist David Kohl's list of "new normals" for a changing world of global economics is that cattle producers need to plan for a "black swan" -- an unexpected event.
Kohl told producers at the ninth annual Cattleman's Workshop to hold back some cash when they have good years to get them through the economic dips.
If input prices jump or commodity prices drop, ranchers need to be ready to react.
"When you make money, have a plan for that profit," he said, rather than spending it on "killer toys" -- luxuries beyond what is needed. Assets that can quickly be turned into cash when you need it, he said, are a better investment.
Along with economics, agriculture's mantra has also changed.
"It's no longer about getting bigger, it's about getting better," he said.
Kohl said price volatility will continue to be extreme for ag producers. Although there will be more upside opportunities in agriculture in the next seven years than there have been in the past 30, he said, there will also be more opportunities to fail.
Overall, he said, "I'm optimistic about the U.S. livestock and grain industries."
Rick Stott, Agri-Beef's executive vice president of business development, predicts growth in the cattle industry will come from exports to emerging countries such as Vietnam and the Philippines.
As these markets open, he said creating a brand for beef products will be even more important.
"U.S. beef is known as one of the best in the world. It's a premium standard," he said, urging producers to tell their story and take advantage of the Internet.
He said 84 percent of households are on the Web. Social media sites such as Facebook and Pinterest provide opportunities to "communicate what you do."
Bill Tierney, chief economist of AgResource Co. in Chicago said although there is still a strong demand for U.S. feeder cattle, the supply continues to shrink.
"The feeder cattle industry has lost money in eight of the last nine years," he said. "The major part of those losses is due to high cost of feed."
As a result of reduced production, he said, packers are also under severe financial pressure.
Tierney said U.S. hay production is the lowest it has been in decades because other crops are being planted.
"We've had two years back-to-back decline in hay production and are looking at a third year in 2013," he said.
He said U.S. hay reserves are at a record low, coupled with poor pasture conditions in many areas due to drought.
The biggest risk to producers over the next nine months, he said, continues to be the weather.