September 2013
Farm & Field

Beef Cattle Outlook

 

Ample Reasons for Optimistic Industry Future

A quick look at some major trends in the U.S. cattle industry could lead to a pessimistic assessment of the future:

On Jan. 1 this year, the U.S. cattle inventory stood at 89.3 million head, the lowest level since 1952 and well below the more than 130 million head in 1975 when cattle numbers peaked. Even more significant, the size of the U.S. cattle herd has fallen in 14 of the past 16 years. In Alabama, where beef cattle production ranks second behind broilers in cash receipts, the situation was somewhat better – an increase of 1 percent in cattle numbers to 1.22 million from 2012 to this year.

The number of U.S. farms with beef cows has declined an average of 1.2 percent yearly since 1986.

Based on current trends, U.S. farmers will produce more pork than beef next year for the first time since 1952. Poultry production leads both pork and beef output by a wide margin.

 

However, other trends strongly suggest all is not gloom and doom for the nation’s cattle producers and, while nothing is guaranteed, there is ample reason for optimism about the industry’s future.

Cycles and trends in U.S. cattle production, a look at what’s ahead and opportunities that can help lead to improved bottom lines for producers, were explored at a recent agricultural economics seminar at the University of Missouri-Columbia.

Providing a review of the industry’s trends and cycles was Dr. Ron Plain, who holds an endowed chair in the university’s Department of Agricultural and Applied Economics.

On the good news side of the ledger is the fact carcass weights have increased steadily from 650 pounds in 1960 to more than 825 pounds today. In addition to animals being heavier, they are producing much leaner beef due to improved genetics, nutrition and management, Plain said.

While many consumers may not realize it, beef has become a better bargain. From 1960 to 2012, the deflated average retail price of beef decreased 20 percent, he observed. The pricing sword is a two-edged one, of course, because the deflated average farm price of cattle has declined almost twice as much – 39 percent—during that period.

At the same time, competition for the consumer’s protein dollar also has stiffened as the deflated average retail prices of pork, chicken and turkey have declined by 24 percent, 57 percent and 62 percent, respectively, Plain noted.

 

The U.S. ranks first worldwide in beef production, but now is in fourth place among top beef exporting nations, falling behind India, Brazil and Australia, in that order. But when it comes to imports of beef, the U.S. again this year is in first place, Plain pointed out.

Stepping back for a "big picture" look at the nation’s position with respect to food availability, Plain quoted a Chinese proverb, "A country in which food is plentiful has many problems. A country without food has only one problem."

Quoting a fellow economist’s advice, "To fix it, you have to understand it," Dr. Glynn Tonsor, associate professor of agricultural economics at Kansas State University, emphasized the importance of knowing what beef demand is all about. Beef demand is not per capita consumption, he stated, but instead is the quantity of beef consumers will purchase at a given price.

Recent strength in the domestic beef sector has been somewhat surprising, he said, adding that having optimism about the future is rational if the industry responds with efforts targeting consumer priorities.

A 2013 study of those priorities strongly suggests the industry should focus on food safety and product quality. Both issues have a major impact and can be influenced by industry actions. Price also is important, but influencing it is more difficult, Tonsor observed.

The next most important factors are nutrition and health issues.

Looking beyond the domestic market, developing nations can and should be targeted because their growing populations and disposable income will mean an expanding market for meat products.

Taking advantage of those markets won’t be easy, however. African and the Middle Eastern markets are growing, but those nations arguably are the least understood, Tonsor said. The Chinese market also is expanding rapidly, but the U.S. doesn’t enjoy the access to it that Canada does.

"Know your comparative advantage and also be aware of production costs and sales prices," he urged. "Recognize this isn’t your father’s world anymore and manage accordingly."

Expanding on the management angles, Dr. Justin Sexten, an Extension specialist in beef nutrition, noted that overall returns from a calf crop are affected by reproductive efficiency, calf health, growth rate and efficiency, all of which translate into pounds available for sale. Factors influencing the price received are production management, cattle characteristics and marketing skills.

"In many operations, morbidity and mortality prevention are the greatest opportunity for animal performance improvement," Sexten said.

Among his specific tips were:

Separate calves by age to prevent pathogen transmission from older to younger calves.

Move pregnant cows to new calving pasture to minimize pathogen load and exposure time.

For optimum reproduction, manage cows to have a body condition score from 5 to 7 at calving, unless abundant nutrients are available after calving.

Creep feeding is beneficial when performance is limited by the quantity and quality of forage and by milk production.

Sexten also pointed to the value of preconditioning and the use of technological tools (de-wormer, implants, fly control and ionophores) to boost average daily gain in stockers.

Another opportunity for boosting beef production returns is through improved forage management practices, said Dr. Rob Kallenbach, Missouri professor of plant science.

"High feed grain prices make the value of forage greater," a situation presenting "an opportunity for good forage managers to add value to livestock," Kallenbach concluded.