Industry veteran Joe Goggins bluntly says that if the U.S. does not maintain food independence, it will no longer be a superpower. Goggins is one of the country’s most highly respected seedstock auctioneers and CEO of one the largest seedstock operations, Vermilion Ranch, which markets thousands of commercial bred heifers. In addition, as CEO, Goggins has oversight over of one of the country’s largest stockyards, Public Auction Yards, which is owned by his family.
His statement should get everyone’s attention. A big part of being food independent is taking full advantage of our grasslands—which make up the majority of the country’s agricultural land—with beef cattle. With cattle, forages that have no value in a human diet can be converted into nutrient-dense food for people.
However, with the beef cow herd at a 60-year low, a strong market exists for feeder cattle and weigh-up cows. In addition, land prices are at all-time highs, which is compounded with rising interest rates. Combined with the average commercial producer now qualifying as elderly, the beef industry is moving into uncharted waters. There are also many outside factors that are impacting the beef industry including regulatory and tax policies, rapidly depleting aquifers and the impact of the dairy industry being short of replacements.
Market
With a tight supply, the market for commercial cow-calf producers’ cattle can be summed up in one word: great! This goes for the feeder cattle market, bred heifer market and particularly for weigh-up cull cows and bulls. The market is especially hungry for lean beef to mix with the tallow coming from fed cattle that have jumped from a 0.4-inch backfat target for finished cattle to 0.6 inches and up. The demand for ground beef is excellent, helping fuel these record prices for weigh-up cattle, and the biodiesel market is also helping utilize the excess tallow being produced.
However, one has to wonder how energetically efficient it is to put excessive fat on cattle, cut it off and then make diesel fuel out of it. The rule of thumb is it takes 2.25 times more energy to put a pound of fat on a steer compared to a pound of lean. Bred heifers are also selling well, often bringing over $3,000. If you pencil it out, this is a price a producer can pay and come out ahead once depreciation, value of the calf and salvage value are all accounted for.
Goggins observed, “When we get good prices like we are for bred heifers, producers sometimes almost feel embarrassed. They shouldn’t, as they are getting a fair price for their cattle, and you better believe the dealers that are selling them $80,000 pickup trucks or $800,000 tractors don’t feel embarrassed.”
However, for seedstock producers there is sobering news. Although bull sales from reputation herds are selling at or near record averages, Chip Kemp of the American Simmental Association says with the number of cows being down 4.5 million head since 2018, the industry will need approximately 37,000 less bulls in the coming year than it did in 2018. However, Kemp believes that utilizing objective selection tools, heterosis and breed complementarity, as well as good cow sense, producers can rebuild cow herds that fit their environment and still go on to produce carcasses with even heavier weights. But, he does not see the industry returning to as many cows as it has had in the past.
Dairy wild card
The dairy industry in the last several years has embraced genomically testing their cow herd and breeding the top end of their herd with sexed semen to produce replacement heifers. The rest of the herd is bred to beef bulls to produce more desirable feeder cattle. As the beef supply tightened, black-hided crossbred beef-Holstein crosses began selling for around $700—with some fetching up to $1,000—for two-day-old calves, producing more profit potential than the cow could produce in milk during her lactation. Over time, many producers started breeding more and more of their dairy cows to beef bulls. However, this practice has caught up with them to where they now have a shortage of dairy replacement heifers.
In the November 2024 Milk Business Quarterly, Maureen Hanson reported that from 2022 to 2024, the number of U.S. dairy replacement heifers dropped 10%, reaching a 20-year low. With replacement heifers declining for the past seven years, the 2.59 million heifers projected to calve in the coming year is “by far the lowest inventory in 22 years of USDA projections.” For at least the short term, this has forced dairy producers to dramatically increase the number of females they are breeding to Holsteins to regain dairy herd numbers.
Until the dairy herd stabilizes, this will potentially remove a significant number of beef-dairy crosses and/or straight Holsteins entering the feedlot phase of our industry, further exasperating the beef herd’s low inventory and likely causing a short-term spike in prices, as feedlots compete to fill pen space. To date, the number of heifers being fed has remained steady, indicating meaningful herd rebuilding has not yet begun. If the supply further tightens due to the short-term dynamics of the dairy industry, it will be hard for beef producers to resist cashing in on the value of their heifers as feeder cattle compared to the risk of holding back extra replacements.
Land values
Using Iowa as a gauge, land prices have escalated at an amazing pace. It wasn’t that many years ago that good cropland could be bought for $6,000 an acre. A couple of years ago, that jumped to around $10,000 an acre. For this article, WLJ spoke to a producer who had just purchased an adjoining farm for $18,000 per acre. Now crop farmers are buying more marginal, erodible land that once was cropped but has since been put into grassland. Their plans are generally to reestablish this ground as cropland. It is likely they will soon discover why it was put into grass. There is also pressure by people of modest means who are buying marginal farmland in states like Iowa and Missouri for hunting, again pushing up the price of land.
It used to be fashionable for wealthy people to have estates in rural counties outside the major cities where they worked. The heyday for these estates was from the mid-19th century to the mid-20th century, and were located in places like Duchess County north of New York City, Lake County north of Chicago, Westmoreland County east of Pittsburg and Albemarle County southwest of Washington, D.C. They also invariably had seedstock cattle herds that provided both tax benefits and a social network. Today, these tax benefits are largely gone, and seclusion seems to be the new goal.
In Montana, if a ranch has any scenery at all, it gets snapped up by wealthy people looking for a summer retreat. With today’s ease of transportation, ranches in states such New Mexico, Utah, Colorado, Wyoming, the Nebraska Sandhills and Montana have replaced the once-opulent estates outside the cities. The bottom line is that much of the country’s traditional cow-calf ranches have quickly become too expensive to pay off with commercial cows, which makes leasing land almost a necessity.
Commercial cow-calf producer Gordon Philip, who has run an operation on leased land for over 50 years, once numbering as high as 1,000 cows near the Kansas City airport, is adamant about people getting into the business not tying money up in land. At 86 years old, he is still running between 400 and 500 cows with just one hired man. His advice is to make sure a person has enough land to survive a moderate drought.
In Iowa, Ross Havens of Nichols Farms reports they are seeing more cows kept in confinement, generally in hoop barns or existing facilities, with the cows only grazing in the winter on corn stalks. The cattle are generally kept on manure packs that are regularly bedded with stalks. Often, people going this direction can trade the manure to fertilize the corn fields for grazing the stalks and baling stalks for bedding. One producer who is managing his cattle in a hoop barn expressed how pleased he was with the results. He works off the farm, so having the cattle in one spot makes his life much easier in terms of checking and managing his herd.
The government: friend or foe
Goggins is pleased that under a Trump administration, favorable tax policies, which were set to sunset, will remain in place. However, as an active board member of the Livestock Marketing Association, he would like to see these policies become even more agriculture friendly with items like an agriculture exemption on the death tax. Risk management is also high on his agenda, and he would like to see programs like Livestock Risk Protection and rainfall insurance expanded and made more affordable.
The Trump administration has made it clear that he plans to use tariffs as a tool to elicit the desired policies and behavior from other countries. In the past, he also used tariffs, or the threat of tariffs, to level the playing field on trade. The problem is the U.S. is a major exporter of agricultural commodities and food. Therefore, when the U.S. places tariffs on products from a country, they generally retaliate with tariffs on our agricultural products, causing depressed markets and general uncertainty. In his last administration, Trump provided subsidies to U.S. agriculture sectors that were hurt in trade disputes, and if we expect the cow herd to rebuild, he must do so again if we get into a trade war with the major importers of U.S. agricultural products.
Attracting young people
The biggest threat to the beef industry is the average age of commercial cow-calf producers. The last time we experienced similar circumstances—low inventories and strong markets—was in 2015-16 when the average age of commercial producers was around 60 years old. Ten years later, one has to question whether producers, who are pushing 70 years old, and without heirs to follow in their footsteps, will want to invest into comparatively high-priced females, particularly at inflated interest rates. With weigh-up cows bringing record prices and their land never worth more, an unknown percentage of producers will decide it is time to retire.
However, a number of these older producers would like to see the business they built continue and are sometimes willing to take on a young person with the idea of transitioning the operation over to them. The potential younger partners need to be prepared for hard work and long hours—areas that too many young people are ill-prepared to handle. But there are certainly those that are, and we need to do everything we can to get them in and keep them in the cattle business.
Philip has gotten a number of young people into the business by having them serve as interns on his farm. They work hard, but he will cosign a loan to get them started with some cows, which he lets them build over time. However, Philip will not release the cows until the loan is paid off, at which time he helps them go out on their own.
Philip is also adamant that young people shouldn’t tie their money up in land and need to find a banker that understands agriculture. He also says they need to be creative like running cows on shares to get started. He also speaks highly of the USDA’s Beginning Farmer Program, which helps young people get access to needed capital.
Goggins is a big advocate of programs that incentivize entrance into the business. He emphasizes that access to mentorships, capital and land is imperative to get started, and he would like to see the various trade organizations work together to achieve this. He reiterated that if the country wants food security, it must provide farmers and ranchers with exemptions from things like the death tax and address depreciation and capital gains. He also feels that livestock producers need risk management tools equivalent to crop farmers, citing the need for increased funding for Livestock Risk Protection insurance.
The beef industry is certainly at a crossroads, but if managed correctly, beef producers could look forward to sustained profitability on operations headed up by a new generation of ranchers. Let us all work towards wise decisions and policies that will assure the future of the beef industry.
