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Beef production decline continues

U.S. beef production rises and falls in cycles of 8 to 12 years duration. Keep that in mind as you go into 2011.

Beef production decline continues

U.S. beef production rises and falls in cycles of 8 to 12 years duration. Keep that in mind as you go into 2011.

Expansion took place slowly between 2004 and 2007. Numbers began declining during 2008 in response to high feed prices and economic recession. By July 1, 2010, cattle numbers were at 100.8 million head, down 1% from a year earlier.

Beef cow numbers and beef replacement heifer numbers are down 2%. With every cyclic peak since 1975, cattle numbers peaked lower than the previous peak.

Key Points

U.S. beef production is on the downside of the cattle cycle.

High feed prices and competition will delay expansion.

High feeder and feed prices will keep feeder profits marginal.

Numbers are currently about 25% below 35 years ago. Numbers will decline further in 2011. While head counts have declined, meat yield per animal has increased sharply.

Beef prices were strong in 2010, due to declining supplies of beef, lamb and pork, and a slowly recovering economy.

Profit margins still narrow

2011’s outlook is clouded by very high feed prices, a tighter supply of feeder animals and rising supplies of competing meats. Look for beef production to drop about 450 million pounds from a year earlier.

Improving consumer demand led by the slow economic recovery will support high prices. Beef feeding will be only marginally profitable because of high feed prices.

The market will continue to be supported by exports, which will be only slightly lower than the 2.29 billion pounds exported last year. Mexico, Canada and Japan will continue to be our strongest export markets.

Northeast cow-calf operators should continue to see a strong market for feeder cattle. Feeder prices, currently strong, should average about $5 per cwt. higher than a year ago.

Cow slaughter has been high and more heifers are in feedlots. So, it appears another year will pass before cow-calf operations begin to expand.

Beef per capita consumption will drop to about 57.8 pounds in 2011. And, beef’s share will drop to about 33% of total meat consumption.

Beef price increases will be tempered by increases in production of pork and poultry. Retail beef prices at retail will increase some from the year-end average of about $4.50 per pound.

Moore is an ag economist for Penn State University’s Department of Agricultural Economics and Rural Sociology.

More porkis likely in 2011

Some 43% of total U.S. hog inventories are now raised under contract, in this vertically integrated industry, in operations with more than 5,000 hogs. Pennsylvania, the Northeast’s major hog producer, has adapted well to the industry’s structural changes. And, its hog numbers continue to rise — even as the nation’s hog count went the other way.

Pork production in 2010 dropped about 750 million pounds. However, prices were profitable to producers during most of the year.

Late in 2010, producers fed hogs to higher weights, despite big feed-price increases. During last fall’s survey, producers indicated they would farrow 2.89 million sows in the December 2010-February 2011 period — up slightly from last year, but down 4% from two years earlier. The Pennsylvania industry intends to farrow 50,000 sows during the period — up 6% from a year ago.

The major challenge ahead is how to adjust to high feed prices. Corn prices are likely to stay high, as the corn carryover is projected at only 832 million bushels. That’s only half as much as in the past three years.

Due to high feed prices, there’ll probably be little expansion in the year ahead. Pork production may increase only 500 million pounds from a year ago.

Pork exports should increase slightly to 4.7 billion pounds, about 20% of total production. If the economy continues to recover and producers hold down expansion, returns should be positive through 2011.

— Lou Moore

This article published in the February 2011 edition of AMERICAN AGRICULTURIST.

All rights reserved. Copyright Farm Progress Cos. 2011.

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