The beef industry has already experienced a number of difficult years characterized by declining cow numbers and per capita beef supplies.
There was hope in the first half of this year that this downward production phase was coming to an end, but the drought of 2012 has erased those hopes, according to Purdue University Extension economist Chris Hurt.
The mid-year Cattle inventory report from USDA indicated that beef cow numbers had dropped by an additional 3% over the past year. Since 2006, beef cow numbers have dropped by 8% due to much higher feed prices and to the long drought in the Southern Plains. The 2012 calf crop is expected to be down about 2%, and also down 8% from 2006.
Hurt says this year's drought likely means further decreases in cow numbers over the next 12 to14 months.
"The impacts of the drought are just beginning to show up in some of the national data," Hurt adds. "We do know the direction, but not the final magnitude of those impacts. The cattle industry is negatively affected by feed costs and lack of availability of forages. Higher corn and soybean meal price have dropped the value of calves and feeder cattle that will eventually go to the feedlots. Lack of pasture is also causing some early movement of cattle."
Feed price explosion
Since feed prices started rising in mid-June, corn prices have increased around 60% and soybean meal prices are up 25%, Hurt reports.
"Forage conditions have been horrible across the Midwest," Hurt adds.
At the end of July, pastures that were in 'very-poor' and 'poor' condition totaled from 82% to 98% for the states of Indiana, Illinois, Arkansas, Missouri, Iowa, Kansas, Nebraska, and Colorado (USDA:NASS).
"There have been many reports of producers forced to feed hay that was intended for this winter's forage supply," Hurt continues. "Those producers are hoping for late-summer rain that may restore some pasture this fall. If that does not come, a deeper liquidation of cows can be expected."