With farm income projected to be lower for 2024 and 2025 due to lower commodity prices, one bright spot this fall is the cattle market.
Kennedy Cattle Company in Atlantic, Iowa is expanding from its current size at just under 1,000 head to more than 3,700. It’s indicative of the optimism they have for the cattle business.
The beep, beep, beep of loaders in reverse has been a familiar sound at Kennedy Cattle Company for the last few months. Construction crews are working to add pens and grow the 990-head feedlot started in 2012.
“As you can see in the background we’re in the process of putting an expansion on and we’re going to triple that size here,” explains Zak Kennedy. “We hope to be done in the next couple of months.”
He says with cattle numbers at historical lows and cattle prices at historical highs that means high risk for expansion, but also possible high reward.
“We just decided it was time to bring some more outside cattle home and try to feed more of our homegrown feeds,” Kennedy says. “We’re working to be more in control of what’s going on.”
For Kennedy and his family, including his brother Mitch, this expansion provides a better opportunity than trying to buy land in Iowa and their growth plan reflects his outlook on the cattle business.
“I’m bullish in the cattle business, especially in the upper Midwest,” Kennedy says. “We raise a lot of feed here and we’ve got some packing capacity. I also think there are some folks that, for whatever reason, probably won’t be feeding cattle here going forward. I think we can fill that void.”
Kennedy says to grow they had to overcome the regulatory challenges of becoming a concentrated animal feeding operation or CAFO.
“We worked with a really good engineering company that knows the regulations inside and out as well as with our manure management company,” adds Kennedy.
The operation calves 150 head of commercial Angus-based cows that they use to stock their feedyards and they custom feed.
“We’re open to everything,” Kennedy says. “We do a lot of retained ownership with some cow-calf outfits where we feed their calves for them. We do feed a lot of yearlings. I always say we’ll feed about anything.”
Kennedy says they paid financial and mental tuition as the bull cycle in 2014-15 ended abruptly. So, this time they’re risk-proofing their operation.
“From a company standpoint we’re doing a lot better job on our hedging, marketing and in managing the financial aspects of what we do,” Kennedy admits.
One of the biggest differences from 2014-15 are the costs. Kennedy says operating and borrowing costs have skyrocketed and so they’re offsetting that with feed they grow on 1,500 rented acres and being sure to watch the bottom line.
“It’s like anything,” Kennedy says. “You’ve got to manage it and knowing your costs is obviously the biggest part of that process.”
They’re also protecting their investment through Beef Quality Assurance (BQA) protocols and comprehensive disease prevention.
“I think it’s so important for what these cattle cost that those protocols don’t cost much,” Kennedy says. “We’re going to spend the money to try to be on the front side of health and not have a wreck on the back side.”
He says the goal is with nearly two-thirds of their cattle marketed on either a grid or dressed basis that the work will pay back in quality premiums and strong closeouts.
“I think we’re going to be sitting in a pretty good place here for a while,” Kennedy adds. “Calves cost a lot and I get that, but there is still margin. We’re going to try to run with it.”
Hopefully, the work today will help them build for the next generation.
