A rancher moving his herd of cattle. (The Enterprise/file photo)
VALE – A mid-year assessment of the beef industry is like two sides of the same coin.
On one side, overall beef production is good and demand remains steady. On the other side of the coin, beef prices for small and medium-sized producers still lag and imports are outpacing exports.
“Prices are not where they should be,” said Chris Christensen, Willowcreek rancher who is a district vice president of the Oregon Cattlemen’s Association. Matt Rockwell, president of the Malheur County Cattlemen’s Association, agreed.
“While cattle prices might be up from recent lows, we are not where we need to be and you are seeing the smaller operators go out of business. They just can’t make it,” said Rockwell.
John Nalivka, a consultant at Sterling Marketing Inc. in Vale, said last week the wholesale price, or cutout, for beef averaged $2.13 a pound, up from $2.05 at the same time last year. Sterling Marketing furnishes economic analysis and forecasts for livestock. The 4% overall boost in price from last year, though, isn’t enough to be a boon for producers, Rockwell said.
“Beef prices are not keeping up with the price of production,” said Maxwell. Steers, heifers and cows are placed into four categories when they are slaughtered – prime grade, choice, select and standard. The grade of the beef hinges on tenderness, juiciness and flavor. Beef is also judged on its yield, which is the amount of useable lean meat on the carcass.
Prime beef is top-grade while choice beef is also of high quality. Select beef is normally leaner than the higher grades. Standard beef is usually sold as ungraded or as store brand meat.While prices may be down, Nalivka said quality is up.
“In 2013, we had liquidated the cattle inventory to a 60-year low. When we did that it took the bottom third off the cattle inventory, which is the poorest quality. When you take the bottom off you have higher value cattle going forward and we’ve maintained that,” he said.
Nalivka said carcass weights are down – about five or six pounds less than a year ago – but are still grading well.
“To have weights down and still grading high says something about the cattle,” said Nalivka. “The cattle we are feeding today are better cattle and have a better chance of grading.”
Nalivka labeled the current market – in terms of prices, exports and imports – a “mixed bag.”
Nalivka said beef exports were down until May.
“It finally came up to where we started shipping beef,” said Nalivka.
Nalivka said the export market is influenced by high tariffs in traditionally strong U.S. beef importers like South Korea, Japan and Mexico.
“We pay high tariffs going into other countries. We need to have all of those trade agreements redone,” said Nalivka. Beef production also continues to remain steady, said Nalivka.
“From the standpoint of production, we will end up this year projecting 1% more beef production. But at the same time our pork production will be up 4% from a year ago. In all likelihood pork production will exceed beef production for the first time ever,” said Nalivka.
Nalivka said pork producers face a very good market because of floods in the Midwest that hampered farmers and the continued spread of African swine fever in Asia and Europe.
“When it is all said and done it will kill 30 to 35% of all the hogs in China and what that does is boost our imports,” said Nalivka.
One market that is showing stability – and the capacity to remain durable – is niche beef production. These specialized programs focus on the sale of only grass-fed beef raised without antibiotics or growth hormones.
“Grass fed is not a significant portion of the beef industry but has been growing relatively fast,” said Nalivka.
Nalivka said over “the long run if you want to enhance or bolster your revenue, that is what you have to do. Otherwise you are selling commodity cattle and you are at the whim of the market.”
Maxwell said his operation is already focused on the specialized beef market.
“We are finding that market to be strong. There is a real demand for that kind of meat. More and more (ranchers) that are surviving are going to the niche market,” said Maxwell.
Reporter Pat Caldwell: [email protected] or 541-473-3377.
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