Impacts of consolidation in the cattle industry

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Consolidation of the beef industry was on the mind of cow-calf producers as they gathered at the annual Cattle Industry Convention in Nashville, Tenn., Feb. 1-4th.  2011 was a challenging year for cattle producers in the southern states as they faced a monumental drought, one that will go down in the record books as the driest year on record in Texas. The impact of the drought of 2011 further accentuated an already declining U.S. cow herd. The U.S. Department of Agriculture reported the January 1 cattle inventory for all cattle and calves totaled 90.8 million head, two percent below 2011’s January 1 report of 92.7 million. This is the lowest January 1 inventory of all cattle and calves since 1952, which recorded 88.1 million cattle, and extends the trend making this the 14th year out of the last 16 years, where beef cow numbers have declined.

Reports measured more than 600,000 head of cows left the nation’s top cow-calf state of Texas, primarily due to the devastating drought. USDA indicated the shrinking cow numbers in Texas was the largest single year decline for the Texas beef industry, even ahead of a large decline during the dust bowl years of 1934.  David Anderson of Texas AgriLife Extension Service believes 150,000 head left the state to access areas of the country with sufficient pastures and moisture. The majority of these cows moved out of Texas between August and October.  Anderson reports that fewer heifers were also held back to enter the cow herds because with limited feed cattle producers were cautious to take the gamble that they would have adequate feed supplies. South Dakota was one of several states that became a destination for Texas breeding cattle.

In addition to the large number of southern cows leaving the drought stricken region in search for feed, more cows went to market in Texas due to the tight feed resources.  However, as we look ahead in 2012 cow-calf producers are seeing strong incentives to expand their herd. CattleFax told attendees at the National Cattlemen’s Beef Association convention that expansion has already begun in the Northern Plains. The January 1 cattle inventory report confirmed this new focus on heifer retention with heifer replacement numbers up slightly. However, these numbers represent larger increases of heifer retention in South Dakota along with Nebraska, Colorado, Wyoming and Iowa primarily. Favorable weather conditions in 2011 in these states and access to forage supplies along with profit opportunities has sparked this opportunity. Heifer retention provides the opportunity for expansion of the record low cow herd, but, it will also result in a reduction of per-capita beef supplies.

In conclusion, cow calf producers were told by CattleFax analysts that they will face excellent profit opportunities even during this time of high input costs. The record high prices will offset higher input costs and encourage restocking.

Source: Lynn Gordon



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