High Plains producers are familiar with the message about managing their costs, and ag economists reiterated the theme in light of two recent processing plant closures and realignments.
As livestock producers digest the news, Glynn Tonsor, professor in the department of agricultural economics at Kansas State University, said it is a reminder for 2025 to put a priority on knowing their operational costs.
“This always drive break-even values that underpin profitability, and as we come out of (a period of) elevated inflation and production costs, those who manage more tightly are even more positioned for success than in the past when costs were comparatively lower,” Tonsor said.
“For cattle producers, prices will remain high as the industry will start to expand again over the next couple of years, and consumer demand has held up despite the high prices,” said Chad Hart, a professor and Extension specialist at Iowa State University. “For the hog and bird producers, prices will likely remain high as well, as any slippage in beef demand due to their high prices could lead to increased sales for other meats.”
The challenge for all sectors is not in prices or revenues, but in costs, he said. Replacement animals will be expensive, he said, and labor is in short supply, and wages are increasing.
One silver lining could be that feed costs should remain relatively low, Hart said. “Crop supplies are robust, and early projections for 2025 show that continuing.”
Crop losses become livestock cost savings, Hart said.
Hart said the ag economy and general economy both go through cycles, but those cycles are not necessarily aligned. While the general economy has been growing over the past couple of years, the ag economy has shrunk, he said. That combination is usually better for livestock sector than crops, as is the case in this cycle.
“The cycles themselves tend to last between five and 10 years, swinging from economic high to lows and back again,” Hart said. “Hopefully, the growth in the general economy will continue, and it can help pull the ag economy up over the next few years.”
Cattle producers should strategically position their operations for success as they approach the next cattle cycle, said James Mitchell, assistant professor and Extension livestock economist at the University of Arkansas. This involves several key considerations.
- Aligning with consumer preferences: Producers should evaluate how their business aligns with evolving consumer demands.
- Capitalizing on profitability: With current strong profitability, this is an opportune time to make targeted investments that can enhance long-term productivity. These might include upgrading equipment, improving infrastructure or adopting innovative practices to boost production efficiency.
- Building resilience: Producers should prepare for potential market and production disruptions. For example, with market volatility, work to implement strategies to manage price risk, such as forward contracting or hedging. For production challenges, enhance drought resilience through better forage management or diversification of feed sources.
Dave Bergmeier can be reached at 620-227-1822 or [email protected].
