Past weather conditions affect current beef prices

Johnny Morgan, Pruitt, J. Ross

News Release Distributed 12/05/13

BATON ROUGE, La. – Drought conditions in most of the cattle-producing states during portions of the past three years are influencing current price and future prices of beef, according to LSU AgCenter economist Ross Pruitt.

The sell-off of breeding females because of a lack of feed over the past two years is gradually causing retailers to pass some of the cost to consumers, Pruitt said.

“Because producers sold breeding stock, this has led to year-on-year declines in U.S. beef production of at least 3 percent to be pushed into the future while making larger declines in production almost inevitable,” Pruitt said.

A decline in U.S. beef production of at least 6 percent is forecasted for next year, provided pasture conditions stay favorable to allow cattle herds to start expanding.

Pruitt said retailers have slowly been passing on increased beef prices over the past couple of years as beef production declined and continued price increases are expected.

The beef market is basically divided into two categories – yearling cattle finished in feedlots, which provide the steaks and better cuts to the retail market, and the slaughter cows, which mainly go into ground beef.

Pruitt said most of the Farm Belt was affected by drought that was especially severe during the summer of 2012.

“There was much talk about the Texas conditions, but it affected areas from Texas up through North Dakota, then west into Wyoming and Colorado,” Pruitt said. “Then it went east, also, into the Corn Belt of Iowa, Illinois and Indiana.”

The 2012 drought affected everything from corn and soybeans to cattle and hay production as well, Pruitt said.

The trend for cattle producers is to sell off their cull cows in the fall. But earlier this year producers had to sell other animals because the feed was not there, Pruitt said. “They had exhausted their hay supplies, and the pastures were not to a sufficient level to maintain the herds.”

Producers started feeding hay much earlier last year, which exhausted their feed supply earlier than usual, causing the sell-off earlier this year.

“These successive years of drought are finally catching up with us,” Pruitt said. “We started the year with about 29.3 million beef cows, which was 3 percent lower than the beginning of 2012. I expect the U.S. to start 2014 with about 29 million beef cows.”

The decline in the number of cows the past few years means fewer calves. While not all females eventually enter the herd as cows, some need to be retained annually as producers normally cull a set percentage of their cow herd, he said.

Beef cattle slaughter has been declining the past few years, but the droughts have resulted in periods each year when beef cow slaughter was higher than the previous year. This happened earlier this year and during the summer of 2012, Pruitt said.

“When the cow numbers are down, so is the calf crop, which you need in order to run the feedlots to produce steaks,” he said. “A couple of years ago we were at 35 to 36 million calves, and I think we’ll be at 33.5 million in 2013.”

The interest is there to increase herd size, Pruitt said, but the weather is the determining factor of how many cows a producer can carry. This is causing the price increases in beef.

“I think we’re going to see about 1 to 1 1/2 percent decline in beef production this year, and 6 percent declines in 2014 over 2013 if producers are able to start rebuilding the U.S. beef herd,” Pruitt said. “An early forecast has 2015 beef production at over 3 percent lower than 2014.”

This will result in higher prices at the grocery store over the next few years because it takes time to get the herd numbers back up, Pruitt said.

“I don’t think we’re going to see any major overnight price increases, but we are already seeing the increases being pushed through,” Pruitt said. “USDA is reporting an all-fresh beef price of just under $5 per pound right now. I would be surprised if by the middle of 2014 this price isn’t 10 to 15 cents higher.

Johnny Morgan

12/6/2013 1:17:56 AM
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