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Cattle feeders still face obstacles to profitability

The past 15 months have been tough ones financially for cattle feeders. And while the picture has improved some this spring, profitability is still eluding many in the cattle business.According to Gregg Doud, chief economist for the National Cattlemen’s Beef Association, one of the biggest negative price factors right now is the value of hides and offal-the so-called ‘drop credit’.

“If we could get that drop credit back to where it was a year ago, that’s five or six dollars a hundredweight,” says Doud, “and if you had that back, everybody would be in pretty good shape-I think everybody would be in the black right now. Those are the pieces that you have to make come together, and until you get that done, you’re just going to continue to struggle.”

Doud says the struggling food service sector is also hurting beef demand.

“Half of our beef is sold at restaurants and outside the home in the United States,” explains Doud, “and since about the third quarter of last year, those restaurants have been down, in some cases, double digits-the white table cloth, the Outback Steakhouse, etcetera-so that’s really been hard on our business and that’s the middle meats, that’s the steaks. That’s where we really get our value out of that.”

Doud says the cattle feeding industry has lost more money in the past 15 months than any other time in history.