Saturday General Session
Beef Production in the New Era of Higher Prices and Higher Costs: Do the Old Rules Apply?
Abstract:
There have been recent “shifts” in prices for cattle and feedstuffs, and consumer spending has affected at least current profitability for cattle producers. Furthermore, government policy changes (the Renewable Fuels Standard and economic stimulus package) have raised questions about which prices to use when incorporating economic variables in genetic selection indexes. While the change in policy will likely lead to new equilibrium prices for feedstuffs and cattle, the relationship between input and output prices will be such that the long-term economic returns to producers will gravitate to near historic levels.
The price ratios demonstrated in this paper vary from year to year and show some cyclical tendencies, but do not have a pronounced trend over the 24-year time period considered. Short-term prices will deviate from the long-term relationship, and these shocks will be addressed with short-term management decisions such as changing placement and marketing weights, ration formulation, culling and retention decisions.
The implications of relatively predictable price ratios are that, at least for long-term decisions, the economic weights and prices of the past are reasonable values for the future. Genetic selection needs to have a long-term focus and relative prices provide additional insight to these decisions.
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About the speaker:
John D. Lawrence is an Extension livestock economist and professor at Iowa State University. He received his bachelor’s degree in animal science at Iowa State University in 1984, his master’s degree in economics in 1986, and a doctorate in agricultural economics at the University of Missouri, Columbia, in 1989. He has been the director of the Iowa Beef Center (IBC) at Iowa State University since 1998, and assistant director of the Iowa Agricultural and Home Economics Experiment Station since July 2004. His primary responsibilities include cattle and hog price outlook, livestock producer marketing and management decision-making, and livestock and meat industry structure. More recently, he has worked in environmental regulations and management systems for beef producers.
Editor’s Note: The above material is provided by and posted with permission of the Beef Improvement Federation. Please direct reprint requests to BIF via the “Contact BIF” page at www.beefimprovement.org.
