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Good prices support beef industry; dairy, cotton await same

For Arizona producers
Four Arizona producers – from left, Paul Rovey, Jay Whetten, Steve Alameda, and Paco Ollerton - discussed the economic wellbeing of their respective crop sectors during the Arizona Farm Bureau annual meeting.
U.S. consumers enjoy eating beef, including higher quality cuts including hamburgers and steaks which fetch higher prices for ranchers

Four agricultural producers from different segments of Arizona agriculture – beef, vegetables, dairy, and cotton - shared differing views on the economic status of their respective industries during a panel discussion at the 2017 Arizona Farm Bureau annual meeting held Nov. 3 at Mesa.

Perhaps the most bullish economic comments were from cattle rancher Jay Whetten at Bonita, Ariz. who noted that beef prices are strong but could be stronger. Vegetable grower Steve Alameda, who farms in California’s Salinas and Imperial valleys and Yuma, Ariz., said the fresh produce business is economically strong right now but is always volatile price wise, noting “this could change any day.”

On the dairy side of the fence was dairyman Paul Rovey of Glendale who discussed ongoing depressed milk prices with hopes that exports, new milk products, automation, and other factors could help perk up prices in 12 to 18 months.

Cotton grower Paco Ollerton of Casa Grande, who harvested his 37th cotton crop this fall, discussed cotton prices which he called “below profitable” for him. He hopes for higher grower prices ahead.

Profitable beef

Beef producer Jay Whetten operates the 76 Ranch in Graham County and serves as the president of the Arizona Cattle Feeder’s Association. He says beef yield and grade (quality) are becoming more important for ranchers to attain higher prices.

“The cattle market has been strong. It’s not as good as we’d like it to be but we live in a very interesting world,” Whetten told the Farm Bureau crowd.

He noted that export demand for U.S. beef is positive.

“Chinese consumption of American beef has gone steadily up since August. They are buying more and more,” he said. 

Domestically, the rancher said U.S. consumers enjoy eating beef, including higher quality cuts including hamburgers and steaks which fetch higher prices for ranchers.

“We are a steak-eating people and we eat a lot of hamburgers and steaks,” Whetten said. “When a packer kills a beef and hangs a side of beef on the rail the good cuts are not hard to sell. There’s pretty good demand for it.”

Lower-priced beef cuts are also favored, thanks in part to Hispanic consumers who enjoy beef-based carne asada and tacos.

“Taco meat can come from the neck, the lower round, and the shoulder – cheaper cuts that are not consumed by some Americans. The two markets (higher and lower end cuts) work together very well.”

Whetten also discussed the difficulty of ranching cows in the arid Southwest. Hot, dry conditions make it harder for ranchers to produce higher quality beef.

“(In the Southwest) It takes a lot of acres to raise one steer. Some acres get rain and others don’t. Yet we have to continue to survive as a business model producing cattle on a ranch.”

Volatile veggies

Steve Alameda of Top Flavor Farms, and president of the Yuma Fresh Vegetable Association, has been in the vegetable business for almost 40 years. The veggie industry has experienced good and bad price years, yet today he believes the vegetable economy is generally good.

“Right now our industry is very healthy,” said Alameda, who quickly added, “but it can change next week.” He said, “All in all we’re experiencing sort of a renaissance in (the) Yuma (area) and we’re doing well.”

Factors which can quickly swing the economic pendulum to the downside include fickle weather in veggie country and elsewhere. A severe winter cold snap in the nation’s Northeast can disrupt the Southwest vegetable market since during extremely cold weather people tend to eat more hot soup and less salad.

Dairy’s challenges

Market volatility is also a major concern in the Arizona dairy industry, says dairyman Paul Rovey at Glendale, who discussed several problems in the worldwide dairy industry that continue to temper U.S. milk prices.

Currently, about 85 percent of total milk solids produced by the U.S. dairy industry are sold domestically while about 15 percent is exported. Rovey says the export number could rise to 20-22 percent in the future.

Rovey discussed trade pacts, including the Trans-Pacific Partnership which is now basically a dead issue in the U.S., plus the current re-negotiation of the North American Free Trade Agreement by the governments of the U.S., Mexico, and Canada.

TTP would not have really hurt or benefitted the U.S. dairy industry, says Rovey. The re-negotiation of NAFTA is a different story.

“The one (trade agreement) that scares the begeebees in dairy is NAFTA because Mexico is our biggest export customer by far. If that relationship gets goofed up we will really suffer.”

He added, “For dairy we’d like to take NAFTA and maybe tune it up and take the good parts and fix the bad parts – leave the good parts on the Mexico side and then go fix the Canadians so they don’t affect that market as drastically and negatively as they currently are.”

Rovey was all smiles about a new dairy enterprise coming to Arizona. He shared that the dairy company Fairlife – a partnership between Coca Cola and select Midwest dairy producers – intends to build a plant in Arizona scheduled to open around Summer 2019.

Currently found in the supermarket dairy case, Rovey said, “The Fairlife product is an ultra-filtered milk with increased protein and no lactose with the same milk sweetness and considerably fewer calories.”

The West Phoenix dairyman said labor shortages in the dairy industry could nearly end over the next several decades for new dairies in the state as the dairy farm of the future shifts to almost 100 percent robotic.

“In 20 years, I think you’ll see 90 percent of the milk in the U.S. produced with robotic feeding and milking…Robots are becoming extremely viable and more affordable.”

Looking ahead, Rovey expects U.S. milk prices to remain lower for the next year or so. He believes dairy overproduction tied to dairy issues in the European Union and New Zeeland will level out and U.S. milk prices could then improve.

Cotton’s wait

Grower Paco Ollerton at Tierre Verde Farms at Casa Grande, Ariz. is the president of the Arizona Cotton Growers Association.

He calls fiber prices this fall in the 70-cent range “unprofitable” for his operation. He remembers better fiber pricing in 2011 when the cotton futures market was about $2 per pound.

Current cotton prices are stuck in a rut due to multiple issues. Perhaps the largest is China which Ollerton says several years ago purchased and stockpiled millions of bales of cotton which in essence reduced the demand and price for U.S. cotton. In 2011 when prices rose, the Chinese government stored up to 70 million bales of cotton they purchased. An estimated 40-50 million bales of the 2011 crop cotton are still in reserve.

In addition to China’s influence is cotton’s No. 1 product competitor polyester which is priced around 50-54 cents per pound, below the price for cotton. Due to polyester and other factors, worldwide demand for cotton has fallen from about 120 million bales in 2011 to about 115 million bales this year.

Ollerton said, “We have more people in the world today and there should be more demand for our cotton goods. Yet cotton is competing today with 50 cent polyester while we’re selling forward contracted cotton for 70 to 75 cents going into this season.”

Despite low pricing, Ollerton remains somewhat optimistic.

“I think better cotton prices will eventually comeback.”

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