How much beef will be available in the next two years? That’s a question that’s been pondered considerably since the drought of 2011 ravaged the key production states of Texas and Oklahoma, and then extended into the Cornbelt in 2012.
Based on USDA’s final range and pasture conditions ratings for 2012, which were released on Oct. 28, states with 40% or more of range/pasture lands rated as in poor or very poor condition accounted for 70.5% of the nation’s beef cows. That figure was 46.1% on Oct. 30, 2011. Only 21.6% of the nation’s cowherd resided in states with 40% or more of their range/pasture lands rated in good or excellent condition. That compares to 36.7% one year ago.
And the impact hasn’t been felt just in the cowherd. The disruption that has occurred in the timing of feedlot placements over the past couple of years will be manifested over the next few months. We commented after last month’s USDA Cattle on Feed report about the relatively large number of lightweight placements being driven by poor wheat pasture conditions. The same will likely be true for December and then, look out – there doesn’t appear to be many feeder cattle behind those since a high proportion of those light calves have already moved to feedyards.
All of this has been discussed over the past two years, but it bears reviewing relative to likely beef output levels in 2013 and beyond. The top chart below shows beef output forecasts from the Livestock Marketing Information Center (LMIC) in Denver and they are, we think, pretty shocking.
The quarterly year-on-year changes for 2013 are huge – 4.5%, 4.7%, 3.7% and 6.3% for Q1 through Q4, respectively. That 6.3% is the largest quarterly year-on-year decline since Q3-2004 when the industry was adjusting to lower exports following the first BSE case in December 2003. To find a larger year/year quarterly decline NOT associated with BSE, we had to go back to Q1-2001 (-7.1%) and then Q2-1987 (-8.1%).
Further, the 2013 changes are just the start. The LMIC forecasts for 2014 predict quarterly production figures that are another 4.9%, 4.8%, 4.4% and 4.4% lower than in 2013. Add those up and you get two-year declines in quarterly beef production of 9.2% in Q1-2014, 9.5% in Q2, 7.9% in Q3 and 10.4% in Q4. Ouch.
More pork produced in the U.S. than beef?
It’s hard to believe that there would be more pork produced in the U.S. than beef but that’s indeed the case if LMIC’s 2014 forecasts play out. The reductions in beef output and renewed growth for pork production in 2014 will put beef tonnage at 23.509 billion lbs. and pork tonnage at a new record level of 23.628 billion lbs.
To be honest, we never thought we would see the day come, and we still may not, but the trends are very strong at the moment. Now, remember, these changes are predicated on normal crop weather in 2013 and 2014, and we all know that may be a heroic assumption. But the fact that a well-known and respected group such as LMIC could forecast higher pork than beef production in the U.S. is pretty astounding.
Let’s be clear, though, that U.S. beef consumption will still exceed pork consumption since the U.S. beef sector exports only about 10% of total output, and the U.S. pork industry exports in excess of 20% of total output. Per-capita beef consumption is forecast at 52.9 lbs. in 2013 and 50.2 lbs. in 2014. Both will be record lows.
2013 Beef Industry Outlook: Are Consumers Near Their Price Limit?
Meanwhile, per-capita pork consumption is forecast at 42.3 lbs. and 42.6 lbs. in those two years, respectively. Those figures are still higher than the all-time low of 38.5 lbs. in 1976, but would rank as the third- and fifth-lowest on record.
As we have pointed out many times, these lower consumption figures are driven far more by supply and cost issues than by demand. While beef and pork demands have softened some, they have been relatively stable since the post-Atkins Diet declines of 2005 and 2006. The reductions in consumption are driven by lower output in the case of beef and growing exports in the case of pork. The output of both sectors would have been significantly larger had costs not exploded since 2007.