Cattle market expert foresees decreasing beef production in 2013

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AMES, Iowa – The recent trend of decreasing beef production likely will continue in 2013 and 2014, said a cattle market expert at Iowa State University this week.
 
Two years of liquidation, brought about by dry weather conditions in key cattle producing states, have put the industry in an even tighter supply situation, said Lee Schulz, an ISU Extension and Outreach livestock specialist and assistant professor of economics. Commercial beef cattle slaughter in 2013 could lag between 4 and 6 percent behind last year’s slaughter numbers, Schulz said.
 
And the biological realities of raising cattle virtually guarantee the trend of declining supplies to continue in 2014, he said.
 
“We know how small the herd is nationally, and, because it takes considerable time to bring a heifer calf into the breeding herd, it would take some time before producers could even begin to grow their herds,” he said. “Even if the right profitability incentives are in place for producers to begin expanding, you probably wouldn’t see overall growth until 2015.”
 
The calf crop of 2012 totaled roughly 34.5 million head. If predictions for a 2 to 4 percent decline hold true, 2013 could produce the smallest U.S. calf crop since 1942, Schulz said.
 
What is unclear is the persistence of the drought.  Continued drought would moderate the short-run effect of tight supplies by provoking more liquidation and postponing heifer retention.  If drought conditions improve, herd inventories would start to stabilize and some heifer retention may begin in 2013.  

“The weather will be one of the big stories for 2013,” Schulz said.  “Will there be adequate moisture?”

While there is general agreement on tight supply fundamentals in 2013 and 2014, there is less certainty regarding beef demand, he said.  As per capita supplies are reduced to historically low levels in coming years, Schulz said retail beef prices could shoot to record highs. The willingness of U.S. consumers to pay those prices at the grocery store could be a key factor in determining how 2013 will play out for beef producers.
 
While 2012 saw record prices and high profitability for corn and soybeans, Schulz noted that profitability in agriculture usually follows a cyclical pattern. High corn prices won’t last forever, he said. And when feed prices become more manageable for cattle producers, the prospects for expansion in beef production become greater, he said.
 
“The soonest you could see growth will probably be 2015, but these things go in cycles,” Schulz said.



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