Business of Farming

THINKING BEYOND THE FARM GATE

LIVING AND COMPETING IN A GLOBAL MARKET

BY ADAM N. RABINOWITZ, PH.D.

It’s difficult to think outside of what we encounter and experience every day, particularly where our farm is concerned. It is probably necessary to clarify this statement: I am referring to the small family farm. This includes the cattle producer with the day job, the retired offshore worker who grows some vegetables to sell with his or her grandchildren on Saturday at the farmers market, the entrepreneur with the small vineyard they are trying to get off the ground….those type of producers. There are certainly large farms with consultants and economists on staff that prognosticate and pontificate and spend considerable time evaluating world events and making strategic trades to lock prices up or down, but they aren’t the farms that I am referring to. However, it is important for all producers, small and large, to know that we now live and compete in a global market influenced by factors far beyond

what we see locally. We have to look beyond the farm gate.

A prime example is the small cattle guy or gal. They are the salt of the earth, working a job all day and then coming home and working the farm every afternoon and most weekends. It is who they are and what they do. They toil all year hoping to raise a calf, take it to the local stockyard and sell that calf. That calf then goes through the food supply chain and ends up back with us as a healthy and tasty protein source. But who determines the price that producer receives that day when he markets that calf at the local stockyard? Is it the local stockyard? Is it the order buyers? Is it the producer? Is it something or someone else?

The short answer is yes – it is all of those. Certainly, the stockyard has a job to do advertising and building a good reputation to attract buyers – and yes, like in every business, some are better than others. The order buyers will buy based on orders they have, and the producer can influence the price received by the quality and condition of the animal he brings. But there are other factors in play. Let’s think about the factors that influence that calf price and why we should be aware of those things.

Feed is a major driver in the price you get for your feeder calves at the stockyard, and corn is the major driver in feed prices. Think about all of the things that influence the price of corn ... and most of those driving factors are nowhere near Alabama. Think about wars and rumors of war – in 2021 according to the Food and Agricultural Organization of the United Nations1 either the Russian Federation or Ukraine, or both, ranked among the top three global exporters of wheat, barley, maize (corn), rapeseed and rapeseed oil, sunflower seed and sunflower oil. The Russian Federation also ranked as the world’s top exporter of nitrogen fertilizers, the second leading supplier of potassic fertilizers and the third largest exporter of phosphorous fertilizers. So, consider how much both the price of corn and the price of inputs needed for the grass you had to fertilize for grazing and hay may have been affected by circumstances across the world beyond our control.

So, let’s move a little closer to home. The current drought monitor2 shows a few spots in Alabama that need some rain (I realize that if you are in one of those spots it is painful and I don’t mean to trivialize that), but for the most part we are at adequate moisture. However, that’s not the case in the Midwest and West Coast. States from Texas to California are now in severe drought, and many of them have been for quite some time. What does that mean to us? The latest cattle inventory numbers showed cattle down 2% from last year. So, there are less cattle out there. Current cattle on feed shows heifers and heifer calves up 3% from 2021 – so that means a lot of guys in those states affected by drought are selling not only their feeder steers and cull heifers, but also some of those heifers that would normally be kept back for replacements. Why does that matter? Well, normally when inventory gets low, then prices get higher. Will it this time? Possibly.

So, will the producer make more money? On one hand we are seeing drought in the US driving down inventory, but we are also seeing scenarios around the world affecting feed and fertilizer prices….and I haven’t even mentioned inflation to this point.

So, what is the answer? Keep an eye on things. Do your homework and know your cost of production. Look beyond the farm gate at events taking place around you both domestically and abroad because they all affect us. We are in a time of some of the greatest access to information and the greatest access to wrong information so vet your sources and have a plan. 1 https://www.fao.org/3/cb9013en/cb9013en.pdf 2 https://droughtmonitor.unl.edu/