Charlie Barham and I recently attended the 2023 Arkansas Cattleman’s Association’s Annual Conference in Hot Springs. Over a period of two days, we visited with cattle ranchers, sale barn operators, ag academia, and ag service providers. If we heard it once, we heard it a thousand times… the beef market is approaching territory not seen in quite some time.
For the past two years, different parts of our country suffered from extensive droughts. Beginning on the west coast in 2021, it was the south’s turn in 2022. What happens during drought is the hay growers can’t grow enough hay to meet the demand. Cattle ranchers must determine whether they can feed their herd throughout the winter months. We saw in Arkansas and Texas last year that many herds were partially or totally liquidated because of the lack of feed.
During that time, demand for beef was as strong as ever. The meat processors were busy, and the big ag companies had plenty of cows to purchase due to all the ranchers having to thin out or sell off their herds. Beef prices remained reasonable, and the consumers were happy. Cow prices at the actions weren’t very good for the ranchers. Looking back, they were getting beat up twice. 1. The cows they were selling weren’t providing much of a return. 2. Future earnings were damaged since their herds were either gone or much smaller.
What’s not being realized by the public is the volume of momma cows that were harvested during this time. Harvesting the calves whose sole purpose is to feed our families is one thing. When a high number of momma cows go to harvest, the result is a gigantic domino effect that lasts for years.
It takes approximately three years to raise a calf to a weight that makes sense to process. Three years… It takes at least two years before a replacement heifer is old enough to calve. Two years… The math says it will take at least 5 years to begin to rebuild a herd. The more experienced ranchers who have been through these cycles in the past all agreed that it takes approximately seven years to rebuild a herd.
What Charlie and I kept hearing at the conference was the lack of interest or ability for these ranchers to start rebuilding their herd at this time. Do ranchers take their yearlings and heifers to auction and cash out while the getting is good? The prices at the cattle auctions are as high as they’ve been since 2014 and show no signs of slowing down. Ranchers need money now to pay their bills. Consumers need beef now to feed their families. Or… do ranchers hold steady and rebuild their herd, missing the opportunity to gain financially? Ranchers are facing a hard decision right now.
Based on all the information already shared, the higher cow prices may last five years or more. Unfortunately, the increased prices for the calves will be passed on to the consumer once the calves being bought by the big ag companies start showing up at the meat department of grocery stores. It may be six months to a year before it really hits, but just know it’s coming.
Your local farm-to-table beef sources will have difficult decisions to make over the next couple of years. As it stands today, Charlie can make nearly as much money selling a yearling at auction than what I pay him for a three-year-old calf ready for the processor. That’s a fact. He can ween a calf, feed it for a few more months, auction the calf near its first birthday, and make great money for much less work. Or… he could hold on to the calf after weening, feed it sweet potatoes and corn every day for three years (very expensive), and then sell the calf to Barham’s Ozark Beef at a price below today’s market price. Put yourself in his boots, which would you choose?
Don’t be surprised if you see farm-to-table beef outfits hit the brake on the retail side of their business. Financially it won’t make sense unless they increase their prices now. The issue is the prices at the big grocery stores won’t increase as quickly as the farm-to-table operation needs to increase their prices to compete with the cattle auctions. If farm-to-table ranchers increase their prices now to reflect the real beef market, there’s no way they could compete with the current grocery store prices. With inflation as it is, folks are already having a hard time justifying the higher cost of farm-to-table beef. Throw a big price increase in the mix and now there’s a big problem for everyone (except the big grocery stores).
So, what did I learn this weekend? The next five to seven years are going to be a wild roller coaster ride for the beef market. I realize the sources of this info were all based in Arkansas, but so many other cattle producing states have been delt the same hand. This is not an Arkansas problem; this is a problem the entire country will share. Will prices at Barham’s Ozark Beef increase soon? Yep. How much and when? No sure… Everything is happening so fast, and we need to truly understand all the factors. For two years, the big issue has been the dramatic increase of input costs such as hay, fertilizer, corn, equipment, etc. Those issues remain a problem. Now the opportunity cost plays just as big a role as the input costs.
We have spent the past four years servicing a very loyal customer base who keeps coming back for more Barham’s Ozark Beef. We appreciate their business more than you could ever imagine. Because of their loyalty, we will remain loyal to them and continue producing beef for their families. I don’t see a scenario where we are not producing farm-to-table beef. The price increase may scare some off (we get it), but we hope they’ll return once prices across the board begin to increase. We are so proud to be the beef provider for so many Beef Snobs across this region. Hang in there with us as we navigate the next few years.
Sincerely,
Ed Linck