As Beef Prices Slip, Risk Management Helps
Dollar returns to beef cow-calf herd owners have never been greater than the last three years. Now, 2015 appears to end still near those record highs.
"It's a great time to be in the Missouri cattle industry," says Scott Brown, University of Missouri beef economist.
More than herd owners benefit from high beef prices. Cattle and forages are a major income source for agriculture and Missouri. The state ranks third in U.S. cattle numbers.
"Cattle prices can cycle," Brown warns. In a talk planned for the Missouri Livestock Symposium, Dec. 5, in Kirksville, he has tips for the future. He will talk about managing risks in a time of growing cattle numbers - and declining prices.
He will talk at 10 a.m., Saturday. The symposium is at the William Matthew Middle School, 1515 S. Cottage Grove Ave. Several tracks of talks run from 8 a.m. to 5 p.m. Brown speaks in the farm management section.
The MU economic researcher says risk management is a key to success in the future. Beef producers have benefitted from recent high prices; however, with a growing U.S. cow herd, after decades of decline, more beef brings lower prices.
In recent weeks, prices for feeder calves and fed cattle have shown volatility.
Calf owners who locked in high prices will end their year with more dollars than those who rode the price cycle down.
"At current prices, you can still get profit-making prices," Brown says.
In recent talks, Brown told beef producers to look to corn farmers who have faced volatile drops in crop prices. They manage risks.
He advises checking with brokers who sell crop insurance. "Most also sell Livestock Risk Protection, a federally supported plan. If they don't, they will know who does."
LRP is the newest in risk management tools, Brown says. Other options have been available for years, but are not used often enough. "That is changing," he says.
The tools include forward contracts, Chicago Mercantile Exchange futures or options, and livestock insurance. Brown says to use these tools for risk management, not speculation.
"You buy risk management on cattle like you buy insurance on your car," he says. "You hope you never collect."
A starting point is to know the break-even point on your cattle. That gives a target for buying coverage.
With several tools available, they can be used in combination. "Cattle price outlooks, rising or falling, help determine the right plan."
Brown will walk producers through some methods, step by step.
The Missouri Livestock Symposium is free, with no advance registration required. The program offers dozens of sessions in all livestock and forage enterprises. The opening session Friday runs 4 to 10 p.m. The keynote speaker is Mike Adams of AgriTalk radio network.
A free dinner is offered, as well as a trade show.
For details, call the MU Extension Center in Adair County, 660-665-9866. The full program appears at www.missourilivestock.com.
Source: University of Missouri Extension
