According to the June Cattle on Feed Report from the U.S. Department of Agriculture released July 19, cattle inventories in feedlots with 1,000 head or more total at 10.4 million head as of July 1. This number is down 3 percent from inventories on July 1, 2012. For the past 11 months this number has decreased.
Declining feedlot inventories are a true reflection of the general decrease in cattle numbers in the U.S.
“The beef cow herd at the beginning of 2013 was the lowest since 1962,” said Derrell Peel, professor, and Charles Breedlove Professorship in Agribusiness at the Oklahoma State University Department of Agricultural Economics.
According to Scott Brown, research assistant professor in the Department of Agricultural and Applied Economics at the University of Missouri, stronger crop prices during the last few years have affected the cattle industry in a couple of ways.
Firstly, increasing the cost of producing meat due to more expensive animal feed.
Secondly, increasing the land devoted to crop production at the expense of pasture. “This smaller pasture base makes the droughts of the past three years even more difficult for the cow-calf industry to handle, one of the major reasons that beef cow inventory has declined for the past seven years in a row.”
The drought in 2011 and 2012 exhausted forage reserves in the country and that, combined with a delayed spring featuring colder and wetter than average conditions, are the principal cause of additional cow herd liquidation in 2013.
“Economic incentives have been in place for a larger beef cowherd for the last few years, but there has not been enough grass in good condition in important beef cow producing areas to grow the U.S. herd in total,” Brown said.
According to Peel, feedlots should see some relief from record feed prices with a larger 2013 corn crop. The national average corn price is expected to average $4.50-$5.00/bushel for the 2013-2014 corn marketing year, about $2.00/bushel lower than 2012-2013.
“Some feedlot capacity is expected to exit the industry in the next couple of years,” Peel said. It has been a slow process but some feedlots have gone out of business in 2013 and more is expected.”
As we look toward the future, Brown suggested that, “prices received are likely to stay elevated for all in the beef supply chain for the next few years, as the supply of cattle and beef declines, especially in per person terms,” Brown said.
Brown added that cattle and calf supplies will remain tight for the next two to three years and that will result in real opportunities for cattle producers especially if we harvest normal levels of corn and soybeans.
“Cow-calf producers are very much in the drivers’ seat for the foreseeable future, which will translate into strong prices for calves,” Peel said.
