Beef producers command high prices, but industry hard to enter

FAIRFIELD – There has never been a better time to raise cattle, but there are still large obstacles for young people trying to get into the business.

Patrick Wall is a beef specialist with Iowa State University Extension and Outreach, covering 17 counties in Southeast Iowa. He said the price per pound that producers are getting for live animals has more than doubled in the past five years, and that feeder calves are being sold for as much as $4 per pound.

“We’re breaking records almost every day,” Wall said. “The cow-calf sector is on cloud nine. They’ve never been paid like this before.”

Wall noted there are a lot of recent policy changes that are affecting the beef industry, including one this week. On Monday, May 12, the U.S. government announced it was shutting the border with Mexico on imports of cattle, meaning no Mexican cattle can enter the U.S.

“There were fears of a disease, a screwworm, detected in Mexican cattle, and they definitely want to keep that out of the U.S. supply,” Wall said.

Another change, not as recent but certainly impactful, was the introduction a few years ago of the Livestock Risk Protection (LRP) program, a government program that protects livestock producers from risk the same way that similar programs protect grain farmers. Wall said that the grain protection programs began first, and thanks to lobbying from the livestock industry, those risk protections were extended to livestock as well. He said this is a major development because people had been leaving the beef industry because it wasn’t as safe as row cropping.

Even though these recent developments of new legislation combined with great prices should attract people to the beef industry, Wall said it’s harder for young producers to get loans. He said the average age of a cattle producer today is 59.

“When the drought and poor prices hit, a lot of producers sold every cow they had and retired,” Wall said. “And if the only person who can replace them is a 20-something who has to go to the bank and borrow money, he can’t do it, or he has to do it much slower than he wants to. He has to work his tail off to build that business so he can sustain himself on just livestock because that’s hard.”

Wall said it’s hard to find a bank that will lend a producer money using only their cows as collateral.

“You need farmland, equipment or something else the bank can use as collateral. Cows are just not enough,” Wall said. “Back in 2014, a lot of 20-somethings bought cattle for astronomical prices, and then a lot of them didn’t make it. You added so much supply, but the demand didn’t follow, and the market tanked. The banks got smarter, and as a result quit doing those [loans]. And now the interest rates are much higher than in 2014.”

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Call Andy Hallman at 641-575-0135 or email him at andy.hallman@southeastiowaunion.com