Raising cattle is not an easy life. Feeding livestock on cold mornings, the long hours of calving season, maintaining herd health day in and day out – it can be difficult and often exhausting work. But today’s cattle producers are resilient and adaptable as they navigate high costs, drought, environmental headwinds and many other challenges.
In this issue of AgViews, we look at the state of the cattle industry and hear from local cattle producers on the keys to a successful operation and why they enjoy what they do.
My family loves beef. Both my wife and I grew up on farms that raised cattle, so having good beef was something we took for granted. And it’s something we have supplied to our own family as they have grown up and had families of their own. Based on robust demand – even at elevated prices – it appears that most Americans still love their beef as well. Up until recently, I still raised my own cattle. It’s hard to beat good homegrown beef. But a couple of years ago, I stopped, and instead started buying a good steer from a reputable source and friend. That was almost as good as what I raised myself.
$4,000 – that’s roughly what it cost for me to buy, slaughter and process a steer. Not cheap, right?
As that example shows, prices for cattle are currently high. But, like other parts of the ag industry, costs are high too. Let’s take a closer look at the cattle market and some of the chal-
lenges – and opportunities – cow/calf producers are facing.
WHAT TO KNOW ABOUT TODAY'S CATTLE PRODUCERS
These days, the bulk of our agricultural borrowers are grain producers. It’s largely a function of where we live and the type and topography of land and soil we’re blessed with. Raising both grain and livestock used to be a lot more common than it is today because it simply made sense to diversify and use marginal land to graze cattle or grow hay. A lot of that land is now used for growing crops. It became a matter of economics.
Today’s cattle producers are considerably different than just a few short decades ago. They’ve made huge progress in the efficiency and quality of the animals they raise. Like in grain farming, improved genetics, technology and good management practices have
“$4,000 – that’s roughly what it cost for me to buy, slaughter and process a steer. Not cheap, right?”
allowed producers to make significant gains in the quality of their livestock and meet increasingly specific consumer preferences and demands.
Raising cattle is not an easy life. It’s still physically hard work. Keeping and maintaining good fences (and understanding that good fences make for good neighbors), putting up hay, feeding livestock during sub-zero winter mornings, treating sick animals, long hours during calving season and very few days off (cattle need to eat every day, after all) – all of this isn’t for the faint of heart. I’ve had several broken bones in my life, and most were related to cattle!
THE STATE OF THE MARKET: HIGH COSTS, BUT HIGH PRICES TOO
The cattle business hasn’t been immune to inflation and the higher costs that are also impacting other farmers, ranchers and producers. Production costs are higher, as the machinery and equipment needed to operate a cattle operation have gotten a lot more expensive. A big round baler, for example, now costs around $75,000.
But, as I mentioned, cattle prices are also high. Typically, a cow/calf producer may wean their calves in the fall weighing 500-600 pounds, depending on factors such as breed or age. 500-pound steer calves are currently priced around $3 per pound – so approximately $1,500 for a calf. Heifers (young females) aren’t too far behind. Fat cattle – those ready for slaughter –can weigh around 1,500 pounds and bring just under $2 per pound.
Cattle producers deserve their current prosperity. They go through – and have gone through – some tough times with lower prices, drought, disease and environmental headwinds, just to name
a few obstacles. The work required on a daily basis to manage and maintain herd health and animal comfort is challenging and not for the faint of heart.
RECENT MARKET TRENDS
Make no mistake: The cattle business is a hugely important slice of U.S. agriculture. Just take a look at the table below showing the total 2023 receipts for cattle/calves compared to other agricultural commodities.
have a significant economic impact. Beef traceability is also becoming more important for optimizing performance and profitability, allowing packers and processors to track the source of cattle though supply chains.
Cattle producers go through cycles just like grain producers, and it’s interesting to look at the total U.S. cattle numbers over the past few years. When prices are high, there’s historically been a tendency to build back the herd and hold back heifers to take advantage of
2023 U.S. Crop and Livestock Receipts
FOOTNOTES | DATA AS OF SEPTEMBER 5, 2024 Values are rounded to the nearest thousand. When ‘Real (2024 dollars)’ is selected, nominal values are adjusted for inflation using the U.S. Bureau of Economic Analysis Gross Domestic Product Price Index (BEA API series code: A191RG) rebased to 2024 by USDA, Economic Research Service. USDA/ERS Farm Income and Wealth Statistics
The U.S. raises a lot of cattle – around 90 million animals at any given time. Compare that to Brazil, which has well over 200 million head. Many large dairy farms are now breeding many of their dairy cows with beef bulls to make for more desirable cuts of meat and take advantage of strong beef markets. Beef-ondairy cattle now account for 18%-24% of U.S. beef production.
One item to watch when it comes to cattle producers is the importance of implementing biosecurity management measures. This can help reduce the risk of disease outbreaks that could
anticipated continuing profitable prices.
In the face of the smallest calf crop in history, that doesn't appear to be the case in this cycle. Those young females are worth a lot of money going to the feedlot to be finished out as slaughtered cattle rather than being held back to ultimately increase the herd size.
Moreover, given the life cycle of a beef animal – which is about 25-30 months from the time a cow or heifer is bred to the time it’s ready for slaughter –quickly increasing the beef supply is hard to do.
“Cattle producers deserve their current prosperity. They go through – and have gone through – some tough times with lower prices, drought, disease and environmental headwinds, just to name a few obstacles.”
Something else to watch: Despite lower cattle numbers overall, the total beef supply is steady or up. How can that be? Well, with cheaper feed, such as corn and beans, being fed to cattle in feedlots, producers are keeping them at a heavier weight. In other words, producers are adding pounds to the total supply for every animal slaughtered.
KEYS TO A SUCCESSFUL CATTLE OPERATION
To learn more about the cattle business, we recently connected with a couple Bell customers to hear about their experience raising cattle, and the changes they’ve seen in the industry over the last decade.
Read their stories starting on the next page.
The Olson Family | WYNDMERE, N.D.
David Olson lives on his grandfather’s original homesteaded farm north of Wyndmere with his wife, Rosemary, and started raising cattle with his dad there in 1975. In 2010, David and Rosemary’s son Cody joined the operation, making him the 4th generation of the Olson family to work on the farm.
David’s dad typically raised 90-100 head of cattle, but David and Cody have expanded that number to over 300 in recent years. As David approaches retirement, he and Cody have started to scale back as Cody prepares to take over. They currently have 260 calves from the spring that will be transitioned off the farm for sale in upcoming weeks. In addition to their cattle, David and Cody also have a small grain operation of soybeans and corn.
David shares his experience with us below. What’s the best thing about being in the cattle business?
Seeing that first calf in the spring is something we really enjoy!
What’s the worst part about being in the cattle business?
When the weather doesn’t cooperate, especially during spring calving. That can put a lot of stress on the calves.
What are the keys to running a profitable cattle operation?
We’ve been fortunate over the years to keep adding pasture to our operation. This has really given us the opportunity to continue to grow at a steady pace, and taken some of the pressure off,
allowing us to monitor different market cycles and expand at the right times knowing what we could handle. We also put a lot of emphasis on the quality of the replacement heifers we bring in and how we go about that process. We take a lot of pride in our herd.
What are some of the practices you have in place to manage cattle comfort and good health?
A majority of this focus occurs in the spring during calving season, and includes making sure that we keep areas dry and get newborn calves into the warmer when needed. We start calving with the heifers first, and have a setup that includes 13 pens in a barn and a camera system to monitor the process.
What’s been the biggest change in how you’ve raised cattle over the past decade?
Genetics have really improved and become a point of emphasis in the industry for producing a more consistent herd. Improvements in technology and equipment have also made our operation and our processes much more efficient.
Having access to additional feed sources locally, such as beet pulp and grain distillers from local beet production plants and corn ethanol plants, are also noticeable changes.
What is your favorite cut of meat? My family all agrees - ribeye!
Enderson/ Thompson Cattle
Enderson/Thompson Cattle has a long-standing history rooted in family and dedication. It was founded in 1955 when Jerry Enderson purchased a farm in Fergus Falls, marking the start of what would become a multigenerational feedlot operation. Jerry’s grandson Ben Thompson joined the farm out of high school, and then partnered with his uncle Tim Enderson after Jerry passed away in 2010. Enderson/Thompson Cattle sources feeder cattle primarily from Minnesota, North Dakota and South Dakota, bringing the cattle to the farm’s feedlots where they’re finished to an ideal market weight of 1,400-1,500 pounds before being transported to the packer. Ben and Tim buy all of their feed, relying heavily on beet byproducts, ethanol byproducts, corn and grain screenings, in a focus on optimizing both sustainability and efficiency in the operation.
Hear from Ben about their operation
Why are you in the cattle business? I’m in the business because it’s in my blood, deeply tied to my family’s legacy and values. Growing up around
the feed yard, I developed a respect for hard work and the dedication it takes to raise quality cattle. I stepped into this role driven by a desire to carry forward what my grandfather started. For me, cattle ranching is more than just a job — it’s a way of life, one that connects me to my heritage and keeps me focused on building something that will last for future generations.
The best part of being in this business is working hands-on with the cattle. There’s a rewarding connection that comes from caring for these animals daily, seeing them grow, and knowing the quality work that goes into raising them. The hardest part is the volatility of the market, which can make the business side challenging and uncertain. Additionally, there’s a constant responsibility to ensure the animals' wellbeing, which brings its own weight; their health and care are always top priorities, and that level of commitment can be demanding.
What are the keys to running a profitable cattle operation?
First and foremost, knowing your input costs is essential; every expense, from feed to labor, impacts the bottom line, so staying on top of costs is crucial for maintaining profitability. Equally important is having a deep understanding of the market for both buying and selling. Timing and pricing in a volatile market can make a significant difference, so being informed and strategic with market decisions is essential.
| FERGUS FALLS, MINN.
What are some of the practices you have in place to manage cattle comfort and good health?
We prioritize cattle comfort and health through a variety of practices that support our commitment to quality and animal welfare. We maintain a strong partnership with animal health professionals to monitor and support cattle health, addressing any concerns promptly. Additionally, we work tirelessly to keep the feedlot dry and clean, prioritizing the animals' comfort and minimizing stress. Our focus on quality means that the beef we produce consistently ranks in the top 10% in the country.
What’s been the biggest change in how you’ve raised cattle over the past decade?
Advancements in equipment and technology have made our day-to-day work more efficient and precise, and helps us provide consistent, highquality feed for our cattle. Another major shift has been the ability to view and purchase cattle through online auctions. This technology allows us to access a wider range of livestock options without the need for constant travel, giving us flexibility and convenience in sourcing the best cattle for our operation.
What is your favorite cut of meat?
My favorite cut of meat is the ribeye because it has the best flavor and marbling.
Overcoming Mother Nature’s Challenges
LOOKING AHEAD TO 2025: the early outlook appears to be “rinse and repeat” from 2024
The 2024 harvest is now complete, despite Mother Nature throwing some pretty hard-breaking curveballs this growing season in many areas throughout the Midwest.
Heavy rainfall and flooding this spring, followed by an exceptionally dry late summer and early fall, contributed to a lot of uncertainty about harvest yields. But overall, many producers were still able to squeeze out an average crop. Great genetics, good agronomic practices and sound management decisions helped overcome some of Mother Nature’s headwinds. Many areas would like to see additional fall moisture so as not to go into next spring excessively dry. Much of the harvested corn, soybeans and wheat are tucked (but hopefully not locked) away in grain storage. Most bushels aren’t priced or marketed, as producers are hoping for price rallies before spring. Furthermore, current commodity prices are below most producers' cost of production, making it difficult to sell at a loss. Some areas were fortunate to have better-thanaverage growing conditions that led to excellent yields, which may be enough to offset lower prices and help squeeze out a profit.
From a macroeconomic standpoint, it’s somewhat sobering to note that compared to just a couple of years ago, corn is about half the price, there’s no immediate government payment lifeline, interest rates have doubled, and land prices are up nearly 25%-30% on average.
Good managers are taking a hard look at their financials, determining if there was a deterioration in their financial position – mainly with working capital or liquidity – and, if necessary, making plans to correct the situation. Many may be surprised at the decline in working
capital from their 12/31/2023 financials. Looking ahead to 2025, the early outlook appears to be “rinse and repeat” from 2024.
LENDING UPDATES
From a lending perspective, we’re expecting to see significant declines in grain producers’ working capital – the first line of defense in down times. In most cases, this is for two reasons: First, as we have noted, the current 2024 commodity prices may be below breakeven levels for many producers. This certainly will deplete working capital.
Second, flush working capital levels shown on many 12/31/23 accrualbased financial statements may not have materialized at their expected levels due to year-end crop inventory prices not being realized when the inventory was sold later in the year. For example, corn valued at $5/bushel on 12/31/23 financial statements may have been sold later in the year at under $4/bushel – a direct hit to working capital. A double whammy of sorts.
Will lenders start seeing real estate refinances this winter to replenish working capital levels, or will there still be a liquidity cushion? To be determined.
EQUIPMENT MARKET
A fairly accurate predictor of challenging economic times for producers is the health and price of the machinery and equipment market. The very strong values for both new and used equipment that we’ve seen over the past few years – fueled by exceptionally strong demand – have retracted, especially in the used equipment market.
Many producers have made significant investments in recent years to
their equipment line. There were likely several reasons for these increased investments, including:
Pent-up demand, as many producers had delayed updating their equipment prior to 2020 due to a challenging economic environment.
Newer equipment offers upgrades to technology that can substantially increase an operation’s efficiency.
The opportunity to minimize tax liability during profitable years.
Low-cost borrowings.
If a producer is looking to upgrade equipment, and is in a financial position to do so, it could be an excellent time to find value in late-model used equipment. Sometimes it’s a matter of knowing the difference between a need and a want.
FARMLAND VALUES
And then there’s farmland value. It’s interesting that up until a month ago or so, I thought we were starting to see some “air coming out of the balloon” –maybe not a bubble, but a slight retraction from, in many cases, historic highs.
However, in looking at the results of land sales in recent weeks, it seems that values have remained very strong. There’s still a lot of cash out there, and there’s still a high level of interest in buying farmland. It remains to be seen if this strength holds up through the winter as more land possibly comes on the market.
One area to watch is the amount of “no sales,” when sellers’ expectations are not met and land doesn’t sell.
-Lynn Paulson
If you’re ready to talk about your farm financing, call an experienced Bell Bank ag lender in your area. We’re proud to serve American farmers and agribusinesses!
Our roots run deep. Bell has the area’s longest-serving group of lenders, with more than a century of experience among them. We understand that as the business of farming becomes ever more complex each year, you need a lender who understands that challenges are opportunities for success.
We have money to lend. Find greater stability from season to season with a long-term loan, or use shorter-term loans to increase cash flow to your farming operation.
lpaulson@bell.bank
Lynn is Bell’s director of agribusiness development. He writes and speaks about agricultural lending and finance, the global economy and the ag economy.
He has expert knowledge of the ag industry, having worked in ag lending for more than 30 years and as a retired owner and operator of a Benson County, N.D., family farm. His banking experience includes merging several banks and holding companies and growing the new company to $600 million. He has also served on various financial boards.
