Rabobank’s senior beef analyst, Lance Zimmerman, talked in depth with Oklahoma Farm Report’s Ron Hays about the slow progression of rebuilding the U.S.’s mama cow herd. Yesterday, the two men discussed Rabobank’s recently released BBQ Index.
Zimmerman sees two remaining challenges to rebuilding, the biggest being a lower-than-normal quality of spring forage year over year, so how well pasture and range conditions hold up over the rest of spring and summer will be telling. The second challenge is related to margins. While they look incredibly strong in the cow calf sector, the relative margins of most operations as a whole are questionable, as most cow calf businesses are part-time enterprises for their operators, meaning that they are delving into other things such as grains, crops, or jobs in town.
“For those operators who run a cow calf business, but also run a wheat or row crop operation, I’m still concerned about total operation profits,” Zimmerman explained. “What I mean by that is if the grain operation is losing money or not making any money, the producer that has the cows as well may be hesitant to lean into heifer retention if he needs that extra cash revenue to make up for some of the losses or stagnation margins on the grain enterprise.”
Zimmerman has observed a halt to cow slaughter and expects to see substantial heifer retention by 2026 and 2027.
“The biggest message I have for producers as we sit here and admire breaking $3 in the feeder market, $4 in calves, and $2.25 plus or minus, depending on region in the fed market, that we are going to continue to build on these highs,” Zimmerman stated. “That almost seems unfathomable in terms of the price appreciation we have seen since the COVID lows. This has been an exceptionally long run rally, but we are going to be in a situation where if you can retain some heifers now, they have the potential with their first calf, maybe even their second calf still sell into a higher market than what they are seeing for those calves today.”
Looking at beef prices, Zimmerman advised looking at what the prices are doing in relation to greater inflation and to consumer incomes. “When you look at the latest round of ground beef prices, if you are among the top ten percent of income earners in the United States, it only takes about six minutes of work to pay for one pound of ground beef at retail. If you are among the bottom ten percent of income earners in the United States, it takes you 26 minutes of work to pay for one pound of ground beef. That seems jarring, but what is interesting is that during the highs of the pandemic, the bottom ten percent of income earners – it took them thirty minutes to pay for a pound of ground beef.”
The USDA All Fresh Retail Beef Price is $8.50 per pound—an all-time high for April. Zimmerman expects that by 2027 or 2028, the price will be around $9.00 to $9.50. Those all-time highs will trickle down to increased prices in all classes of beef, cattle, and calves, and everything else below them.
“As we go forward, there are lots of things to be excited about if you are in the cattle and beef business,” Zimmerman commented.
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