US beef farmers hit by worst December in history

Darren Carty Livestock Specialist

Nutrition and management specialist Dr Tom Peters told last Saturday’s Beef Finishing Masterclass at Lisbeg Farms that US Farmers were rocked by a collapse in the beef trade during December.

The guest speaker at the event organised by EASYFIX, Alltech, Zoetis and Board Bia said the collapse came about after processing giants JBS sent letters to producers on 8 December saying they would no longer accept cattle for slaughter that weighted over 750kg liveweight with a blanket policy introduced overnight. This, he said, sent a shiver through the industry, with producers scrambling to get cattle accepted in the two other main plants.

It created a surplus in the market, with cattle also flooding into sales yards. He said processors took advantage of the situation and quickly pulled prices back, purchasing cattle at extremely low levels. Panic ensued as processors feared further price cuts leading to a surge in cattle coming on to the market.

Dr Tom Peters, Nutrition and Management Specialist, USA. Beef Finishing Masterclass, Easyfix, Zoetis, Lisbeg Farms, Alltech and Bord Bia. Photograph by David Ruffles

Peters said the situation was made worse by three years of tight supplies and record prices, with processors happy to accept cattle irrespective of carcase weights. With no market signals to suggest otherwise, producers fed cattle into heavier weights to take advantage of the strong trade. “Some feeders were producing cattle up to 1,000kg (live weight) and they were being told, keep bringing them on. They were faced with being told their cattle were no longer wanted and cattle prices dropped $30/100 weight ($30/13.6kg).” Peters said that all producers, but particularly large feedlots with high numbers of finishing cattle, were exposed suffering huge financial and equity losses.

“Some feeders and they are not very big, lost $100,000 over night. Large feeders lost much more”. While the trade has stabilised in the wake of the price collapse, he predicts US cattle are going to be cheaper for all of 2016 despite supplies remaining tight.

In his presentation, Peters was critical of processors saying they should have responded to heavier carcases by changing their cutting techniques. “Finishers in US Northern Plains produce heavier carcases because they are more efficient. Should I apologise because I finish bigger cattle as a result of higher efficiency? No. In poultry birds are getting heavier at slaughter that’s progress. Cattle are no different, but factories have the same cutting methods since the 60s.”

Production pressure

He said producers are facing further challenges with pressure on antibiotics use and discussions on tightening restrictions on the use of hormones. “We (US beef industry) are going into a new era, some forced by European standards and pressure from customers to produce humanely.” Peters did not see the pressure leading to a discontinuation in the use of hormones (he said each hormone administered is worth 35kg liveweight) unless a worldwide policy is introduced. He said this is unlikely when you will see what is happening in South America, where hormones are used every 60 days in Mexico and Brazil. However, he said the use of in–feed antibiotics was a real concern, highlighting restrictions proposed on CTC power as being more restrictive than what is currently in place in Europe. He was forceful in his opinion that greater research into genomics and identification of health resistance traits would allow the industry to compensate for any restrictions in antibiotics and hormone use.

The buoyant trade in the last three years has seen prices of all classes of cattle soar, including cull dairy cows and dairy-bed calves. With a turn in the trade producers are now looking closely at the economics of systems, with dairy-bred cattle coming under the spotlight. In his feedlots, about 20% of cattle finished have dairy genetics. Peters said he hopes to reduce this to 5% in his lifetime and says in his system in jersey cross bull calves are worth nothing. “In our system they are totally inefficient; the cost of putting on (weight) is less than what you get plus packers (factories) don’t want them as they are only a 200kg low-quality carcase.”

While Holstein Fresian cattle have better growth characteristics, he said they are also inefficient to finish for beef farmers. “we can’t feed a Holstein – they have a 17% higher maintenance requirement and when fed heavily also get liver abscesses and packers what livers.” Instead, he and many other farms are focusing on sexed semen to breed replacements and focusing on using good quality. Angus bulls and embryo transfer to reduce the percentage of dairy-bred cattle and increase finishing efficiency.

Opportunity for Irish beef

There has been growing demand for grass-fed beef but Peters says that growth in this market will be slow and limited. “Taste is fat, there will be demand for grass-fed beef but people what US marbled beef.” He added that some producers are also responding to growth in this area and are also targeting supplying this market with US beef produced to a premium standard. In one of his final statements, Dr. Peters said beef industries worldwide should be looking closer at Brazil and be fearful of the expansion that is taking place while he said the US beef industries are worried about the prospect of China utilising GM corn.