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A Part-Time Industry

Given the massive size of the U.S. beef industry, it’s fascinating to realize that its nursery consists of hundreds of thousands of part-time operations. A new report just out says that nearly 80 per cent of the farms in the U.S. with beef cows had fewer than 50 cows in 2007. Most farms with beef cows do not specialize in cow-calf production. In most areas of the U.S., cow-calf production is merely the residual use of land.

This revealing portrait of the U.S. beef cowcalf sector comes in a report by USDA’s Economic Research Service. The report shows that despite consolidation in other sectors of the industry, the structure of the cow-calf sector has scarcely changed since USDA conducted a previous study of the sector in the mid-1990s. Economies of size in beef cow-calf production suggest that farms have an incentive to become larger, says ERS. However, the significant land area required for large-scale beef cow-calf production inhibits many producers from expanding, it says.

The report reveals an aspect of the sector that is both the industry’s strength and its greatest weakness. The sector is extremely diverse in size, geography and climate. But so many operations are tiny. Nearly 765,000 farms, about 35 per cent of the 2.2 million farms in the U.S., had a beef cow inventory in 2007, says the report. Most of these were small, part-time operations. About a third of farms that raise beef animals had a beef cow inventory of fewer than 10 cows. Conversely, just two per cent of farms (those with 500 cows or more) had 20 per cent of all beef cows. Also revealing is that most farms with beef cows do not specialize in beef cowcalf production. In 2008, cattle production accounted for less than 40 per cent of the average farm product value on beef cow-calf farms, says ERS.

The U.S. has some extremely large cow-calf operations but they seem puny compared to those in Australia. Whereas the average herd size in the U.S. is less than 50 head, the average herd down under is nearly 400 head. That’s eight times larger on average. Australia’s largest cattle producer now owns more than 640,000 cattle and its properties spread over 18 million acres. The Australian Agricultural Co. (AAC) reached this size in March when it bought another operation and its 53,000 cattle.

AAC spent more than $20 million to position itself to take advantage of even higher cattle and beef prices this year due to a decline in global cattle numbers and a continued improvement in global beef demand. Australia and Brazil are the only two major beef–producing countries where cattle numbers are expanding. One can’t help thinking about what the U.S. industry will miss out on in the years ahead if its cattle numbers don’t increase.

Given that U.S. prices for all cattle have set new record highs repeatedly this year, one could make the argument that producers here won’t “miss out” on anything. But that’s a short sighted view of the future. Rural communities from coast to coast, and the overall U.S. economy, depend on the beef industry to grow not shrink.

Growth is also vital because it will provide opportunities for a new generation to enter the industry and offer new ideas and perspectives. Watching my own three children (aged 22 to 32), I know their generation is more willing to “think out of the box” and take on more risk than people my age. Young producers are likely to be thorough and innovative in their approach to issues. The industry will need their ideas and energy if it is to take full advantage of the bullish global outlook for beef.

CattleBuyersWeeklycoverstheNorthAmericanmeatandlivestockindustry.Forsubscriptioninformation,contactSteveKayatP.O.Box2533,Petaluma,CA94953,orat707-765-1725,orgoto www.cattlebuyersweekly.com.

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ANorth American viewofthe meatindustry. SteveKayis publisherand editorof

CattleBuyers Weekly

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Whereas the average herd size in the U.S. is less than 50 head, the average herd down under in Australia is nearly 400 head

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A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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