Beef Numbers Lowest Since 1962, Prices On The Rise

WEST LAFAYETTE, Ind.On the heels of record-setting drought that decimated feed supplies and forced producers to cull animals, a new USDA report reveals the U.S. beef cattle herd has hit the lowest point since 1962a factor that will hit consumers in the pocketbooks.

According to the report, total U.S. cattle numbers have dropped to their lowest level since 1952. In fact, beef cow numbers dropped by 3% last year and are down 11%, or 3.6 million head, since 2007.

"The 2012 drought was the primary driver of the decrease last year as it destroyed pastures and forage supplies and catapulted corn, sorghum and soybean meal prices," Hurt said. "The impacts were largest for producers in the Southern Plains where beef cow numbers dropped by 9% last year, and in the Central Plains where numbers were down 6%," said Purdue Extension Agricultural Economist Chris Hurt.

Since 2007, the beef industry has struggled to compete with other sectors for expensive feed and limited land resources that are being converted to corn and soybean acreage. While the Central and Southern Plains states have struggled the most, the eastern Corn Belt certainly hasn't been immune to the herd reduction.

Indiana's beef herd has dropped by 18% since 2007. In 2012, the state lost 2% of the herd, or about 4,000 beef cows. Ohio lost 3%, or 10,000, of the state's beef cows in 2012, but has lost only about 2% of the herd overall since 2007. Hurt said more rain and crop production will  help stop the decline.

"Larger crop and forage production would increase availability and lower prices of these critical feedstuffs," he said. "Given the small size of the calf crop, this would bolster calf prices. A second condition beef producers would like to see before expanding is some assurance that feed prices will have an overall moderation in coming yearsnot just a 1-year decrease."

Low per-capita beef supplies combined with an improving U.S. economy indicate cattle prices could be strong in coming years, giving producers hope and thoughts of expansion. According to the USDA report, the number of replacement heifers is up 2%.

"If weather helps restore feed and forage supplies this summer, a more aggressive expansion of beef heifers should be anticipated beginning in Fall 2013 and continuing into 2014," he said. "Cheaper feed and increased heifer retention will set the stage for very strong calf prices and new record high prices for finished cattle in 2014. If crop and forage production return to near normal, the cattle industry is poised for multiple years of favorable returns and expansion."

While drought conditions have improved in the eastern Corn Belt, much of the western Corn Belt is still suffering severe, extreme and exceptional drought. Beef producers in those areas are unlikely to expand operations until weather improves.

Beef producers aren't the only livestock sector waiting for improved feed supplies to expand.

"Unfortunately for the beef industry, both poultry and pork producers are waiting at the start line, as well," he said. "Those industries can expand production much more quickly and will extract market share from beef during the period from late-2013 to 2016."