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With Beef Prices High, It’s Time To Invest In Better Genetics, MU economist says

Jul 24, 2014

By Scott Brown

“With record high beef prices, about anything works,” said Scott Brown, University of Missouri economist. “It’s hard to make a bad decision.”

Speaking at a national meeting of animal scientists, July 22, Brown warned of low prices ahead. “In cattle cycles prices go up—and down. With volatility, rebuilding cow numbers will face challenges.”

In times of good prices, invest in improvements to make beef herds better, Brown said.

Low prices are not in the immediate future. Time remains to rebuild U.S. cow numbers with quality that meets consumer demand.

This year, calf returns top $400 per cow, according to the Livestock Market Information Center. “We’ve never seen prices like this,” Brown said. High prices are expected to continue through 2015 and beyond.

“Cattle producers can take a lesson from corn producers,” he said. “High prices do come down. We’ll work on changing demand and supply until prices drop. The industry will adjust.”

With high prices, it’s easy to not change anything. By planning now, herd owners can prepare for low prices ahead.

The U.S. beef herd has declined for six decades, sinking from 132 million cows to 88 million.

Herd owners are responding to high-price signals. They have saved heifers for breeding at a rate similar to a herd upturn in the 1970s.

“We can build cow numbers quickly,” Brown said. “That is different than building beef supply quickly. It takes time to bring calves to the feedlot, packing plant and finally to consumers.

“We don’t need 132 million cows again, as we produce more beef with fewer cows.”

Beef supply will be short for some time, which supports continued high prices.

Brown advocated not just adding cow numbers but improving beef quality. Consumers have learned to like higher-quality beef. And they show they’ll pay more for USDA prime grade beef.

Brown’s price charts show premiums for prime beef remain less volatile than for choice, the next lower grade. Select, a grade below choice, remains the lowest-priced.

Improvements can be made in meat quality by selecting genetically proven sires.

Brown showed results from cattle at MU Thompson Farm, Spickard, Missouri. The last load of steers fed in western Kansas graded 30 percent prime carcasses. National average for prime at all U.S. packing plants runs just over 3 percent.

A surprise in data from the Thompson cows that look alike was the thousand-dollar difference in carcass value per cow. Cows with steers that graded prime made the most money.

Better genetics help boost returns from a cow herd. “Even with their variability, cows in the Thompson herd are more consistent than cow herds across the country.”

Difference in profits can make a difference in farm survival at the bottom of the next price cycle.

“There’s a difference between cattle prices and cattle profits,” Brown said. “Building quality genetics reduces risks. Quality meets a growing consumer demand for prime beef.”

There’s a world of producers who raise commodity beef.

U.S. cow herd owners remain slow in adopting new ways. “Those who adopt new technology may get risk mitigation,” Brown concluded.

Earlier, MU Extension beef specialist David Patterson told of progress in Missouri beef herds, and profits, through use of the Show-Me-Select Replacement Heifer Program.

Brown and Patterson are from the MU College of Agriculture, Food and Natural Resources, Columbia.

In a talk after Brown, University of Idaho animal scientist John Hall said, “There will be a lot of heifers bred this year that shouldn’t be bred.”

The beef session was part of the annual meeting of American Society of Animal Science at the Kansas City Convention Center.