Drought, Feed Costs Influence Livestock Markets in 2013

Meat prices will hinge on demand as drought-impacted supplies come to market for 2013.

Published on: Jan 14, 2013

Drought and high feed costs are the overriding factors as to where we are going in the livestock sector in the next few years. That's according to Dr. David Anderson, professor and economist in Livestock and Food Products Marketing with the Texas A&M AgriLife Extension Service.

Anderson addressed livestock producers from across the country today during an issues conference at the American Farm Bureau Federation's 94th Annual Meeting in Nashville.

 "Underlying everything we talk about in terms of livestock markets, everything starts with where we are with drought and pasture conditions," Anderson said. "The beef cow industry relies on pasture and hay. Secondly grain costs. Where we go in terms of costs, particularly, will be based on what happens with the drought in the coming year."

Dr. David Anderson expects more corn production this year. "High prices set the stage for more corn production. Im looking at a record corn crop in 2013 with prices lower than today. Livestock producers just have to make it to fall."
Dr. David Anderson expects more corn production this year. "High prices set the stage for more corn production. I'm looking at a record corn crop in 2013 with prices lower than today. Livestock producers just have to make it to fall."

Corn prices reached up to $8 per bushel last year due to the drought. Higher feed costs led to increased production costs for cattle, pork and poultry farmers, resulting in increased retail prices to consumers. However, Anderson projects that as more acres of corn are planted in 2013, lower prices and decent yields may bring the market back into equilibrium, provided the drought subsides.

Anderson also noted that meat prices in 2013 largely will hinge on demand. Per capita consumption of all meat in the U.S. has declined in the past five years from (beef -- 65 lbs. in 2007 to 52.5 lbs. in 2012), reflecting higher retail prices and a weak domestic economy. "The retail price for beef will continue to be relatively more expensive."

"The key for how high those market prices can go, how much those prices recover to pay for record-high feed costs we can get, is really going to hinge on what happens to demand for those meat products in the overall economy," he said.

While per-capita consumption of beef, pork and poultry are down, Americans still enjoy eating meat. Other factors like a growing population, increased exports and decreased production have affected the per-capita measurement.

"As we see reports over the next couple of years about declining meat consumption, it doesn't have anything to do with people not liking meat," Anderson noted. "It's that we're producing less, and we have booming export markets."

Export markets will continue to be a strong outlet for livestock producers in 2013. American farmers and ranchers stand at the ready to fill increased demand from around the world as the global economy improves and dietary preferences continue to shift to include more meat.

Farmers weathering 2012 are learning plenty about everything from crop insurance to seed genetics as parched conditions reshape farm business across the country. Consider our 5-part approach to moving ahead after the toughest drought since the 1930s.