I had an opportunity to be part of a Strategic Planning Group a few weeks ago. The information was so good and at times so specific that I would like to share some of it with you.
We have really come through some uncertain times in the last 3 years. The one thing that we could count on was instability and volatility. As we move forward into the next 5 years, we can expect some of the same but probably not to the same recent levels. Volatility can provide opportunity or it can really hurt us depending on whether or not we take advantage of the rising markets.
Currently the US economy is growing at a rate of 3%. In order for unemployment to go down, the US economy needs to grow at a rate above 3%. 3% just stabilized our unemployment rate. Now with this said about the US economy, you have to look globally to see how the US is going to get going again. WE HAVE FIND EFFECTIVE DEMAND TO GROW THIS ECONOMY AND GET GOING AGAIN!!
So, let’s talk about China and India. The populations of these two nations are huge and a small move in the right direction will provide huge opportunity for the US and Others. Currently China’s economy is growing at a rate of 8.5%, China needs to grow at a rate of 5.5% or they are in a recession and they will have unemployment. India’s economy is growing at a rate of 6.5% and again they have to grow at a rate of 3% or India is in a recession and they will have unemployment as well. It has been proven that when the populations of China and India are working, the demand for Animal Protein is very strong and this Effective Demand is increasing today. These people want meat and these two countries cannot meet the demand.
Believe it or not, 22% of the population in India eats Beef. For every 5% increase in the consumption in India, it is like adding another US to the BEEF DEMAND!!
With the world demand for animal proteins on the rise and a continual decline in the US and World Beef Cow Herd, we are on a path of convergence of supply and demand that will fuel some very good times right around the corner.
The US economy is stabilizing and Domestic Effective Demand will begin to pick up in 2010. You can expect inflation to be at 4-5% by 2012-2013 and you can expect interest rates to be 8-9% of 2012-2013 as well. Between now and 2012-2013 we need to lock in any and all interest rates and control our costs of production.
The take away from the conference was that the Livestock Industry has turned the tide because of the Effective Demand coming into the market at a time of tightening Beef supplies.
Now is the time to look at your cow herd and make Bull Buying decisions that drive productivity. We try hard to give the best balance of Performance and Carcass traits possible. Look at your Buying Decisions this year as a decision about how much Beef you can put out of your cows. Spend the money and get the best bulls possible for your herd.
Invest in the Females in your herd to maximize the productivity of your Bull purchase.
Investing in your operation today is all about planning for tomorrow. As only John Wooden could say it best, “Failure to plan, Is planning to Fail.” Plan today in 2010 and you will be rewarded with the “Effective Demand” in 2011.
Information from John Wooden, UCLA