The Department of Agriculture predicts cattle prices will rise 20 percent in 2011 over last year. But that pales in comparison to the price of corn, which has more than doubled in the past year to nearly $8 a bushel.
You might think this scenario would tempt plenty of farmers to flip their acres from cattle pasture to cropland. But it's a tough decision that depends on much more than recent prices.
Acres That 'Flex'
Some farmers use the term "flex acres" to describe land that can be used either to graze cattle or to grow crops like corn and soybeans.
Ed Morse has some land just like that outside Council Bluffs, Iowa.
Wearing green coveralls and a tan hat, Morse stands outside his barn watching his 17-year-old son Noah drive a feed wagon down a row of cattle while the animals feast on corn and hay.
This 320-acre farm will see some changes soon. Despite the record-high corn prices, Morse is shifting his land out of corn and soybeans and into pasture.
"With the cattle you're more on your own," he says. "In some ways, it's an act of faith because you have got to look out into the future a couple years and see that this will be a paying proposition as well."
Morse is used to analyzing figures. He's also a law professor at nearby Creighton University in Omaha, Neb. Morse admits corn is tempting but says he'll stick to cows for now.
An Increase In Planting Crops
But that's an unusual decision, according to agricultural economist Darrell Mark at the University of Nebraska-Lincoln.
He says there's been a drop in cattle operations in key Corn Belt states including Iowa, Illinois and Nebraska. "We're seeing an increase in acres being planted to row crops."
In central Missouri's Calloway County, farm owner Margot McMillen says one of her tenants offered her three times the rent to convert some of her pasture land into row crops. But she turned down the offer because of her long-term plans and a desire to avoid knee-jerk decisions based on what commodity is hot.
"It's almost like the gamble," McMillen says. "You make the decision because of what your neighbors are doing, what you hear — sort of the buzz. And you really can do better if you become independent and think on your terms as to what's going to work for me."
Getting Creative To Balance Cattle, Crops
Historically low cattle numbers over the last three years, combined with increasing worldwide demand, have led to some of the highest cattle prices ever.
Sean McClatchey, 38, of Lincoln, Neb., sees this as an opportunity.
"We gotta grow it to make it work," he says. "It's not like maybe it was 30 or 40 years ago where a farm the size of ours could support a family or two."
McClatchey's parents got rid of cattle when he was a boy. He now has 115 head and is slowly increasing his herd size.
He's getting creative with his wheat crop this spring to save on feed and fuel. For example, he'll graze on the wheat fields early in the growing season in a way that will still allow the wheat to be harvested.
McClatchey says these practices allow him to get more than one harvest per year. And he says growing feed on the farm also helps keep costs down.
But it will likely be a while before herd sizes increase from their lowest point since the 1950s. It takes a minimum of 14 months for cattle to move from birth to the market.
While agricultural economist Darrell Mark predicts herd sizes will increase later this year, he doesn't expect it to drive down costs at the meat counter for quite a while.
Meanwhile, farmers like Morse and McClatchey will try to figure out just where the profit tipping point will be.
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