Beef prices surge to record highs, yet profits remain elusive for cattle farmers

Cow grazing

ABINGDON — For the first time in history, the national average price for fresh beef moved above $8 per pound, according to the U.S. Department of Agriculture’s Economic Research Service. Despite record prices and demand at the grocery store, cattle farmers still are vulnerable to market forces.

A jump in interest rates and increased input costs have led to record beef prices in the U.S., said Elijah Griles, host of Virginia Farm Bureau Federation’s CattlePulse podcast.

“We’re seeing an upward trend in the cost of production for feeder cattle,” he said.

Parts of Virginia and the U.S. are still under moderate to severe drought conditions, affecting hay and forage availability. Cow-calf producers are placing a higher percentage of female cattle on feed for slaughter, selling more brood cows and not retaining calves, which is subsequently reducing replacements. This results in cattle inventory contraction.

ERS predicts beef demand will fall by a few pounds per capita in 2025. But until then, prices are expected to climb even higher.

“Higher prices are helpful if a farmer is selling calves or getting out of the business,” explained American Farm Bureau Federation economist Bernt Nelson in a recent Market Intel report. “But what about when they are trying to buy, expand or buy cattle to get started? While higher prices benefit the seller, they make things hard for the buyer.”

Cow-calf farmer Chris Frazier, regional sales and lending manager with Farm Credit of the Virginias, said a recent dip in feed prices has helped Southwest Virginia farmers contend with high interest rates and other inputs.

“Animals are selling for good money, which is a good thing with the high rates,” he said. “People are making enough to offset those high interest rates, but they’re not able to buy those additional 100 acres or piece of equipment, even though they are retaining that cash on hand.”

Other cattle producers are waiting for interest rates to budge.

“To some extent, they are sitting on the sidelines with the expectation that hopefully interest rates will decline in the future versus where they are at today,” Frazier continued.

Griles asked Frazier if an immediate cut to the federal funds rate would help. “Or does it take a while for producers to see that trickle down and influence what is offered by lenders?” he asked.

Overall, it’s a slow process, Frazier replied. Farmers should utilize price risk management tools in the meantime.

“Mentally…we’re in a better place,” he said. “We’re more optimistic and seeing light at the end of the tunnel.”

Visit bit.ly/3XkYzyH to hear CattlePulse podcast episodes.

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