New OSU Economist Says Beef Demand Central To Profitability For Cattlemen And Price Outlook

Cattle producers are enjoying better prices and better profitability than they have seen in years. Speaking at the Beef Improvement Federation annual convention in June, Oklahoma State University Ag Economics Professor John Michael Riley share how the linchpin for profitability has been the outstanding demand for beef over the last couple of years. In spite of the high prices, U.S. beef demand is growing and that makes him less timid about where prices are going.

“The fact that producers and industry participants have made the strides to get out of that steep decline that we were experiencing in the 80’s and 90’s and to get into a state of increase is just absolutely fabulous,” Riley said.

Excellent beef demand is supporting high cattle prices and providing cattle producers with an opportunity to make money. Although producers with high variable costs are able to make money with current market prices, historically they would be eliminated. In order to be a low-cost operation and receive the highest incentives on a dollar value basis, producers should aim well below their break-even point. Regardless of management practices, he said the market is offering producers an incentive to continue producing beef cattle and an incentive to grow their herd.

In looking at increasing your herd, producers may ponder retaining their own heifers or turning to an outside specialist for heifer development. Producers don’t have to buy a bred female, they could hold back their own heifers, but Riley said producers need to think about that value if they sell their heifers and also the time required to develop that female. So instead of trying to be a cow-calf operator and a heifer developer, he said producers should consider sticking to being cow-calf producers and purchase their replacement females.