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