The U.S. beef industry is in the wake of a severe drought that is burning up the southern High Plains – particularly Texas, Oklahoma, Kansas and New Mexico. Beginning next year, supplies of processed cattle should tighten. This will more than likely mean higher prices for beef.
This same drought that is burning up the middle of the country means consumers will probably pay more for their hamburgers and strip steaks.Ranchers across these states are liquidating their herds at historically high rates as grazing land, feed and water supplies dry up. Texas alone is expected to lose 600,000 head of beef cattle.
Those livestock producers who have been forced to shrink their herds will be left with fewer cattle to sell. Because they’ve been forced to sell off large numbers of heifers, many will have smaller breeding herds to rebuild supplies.
Kansas Farm Bureau economist Mark Nelson predicts that as 2012 and 2013 arrive, there will be tighter and tighter supplies of cattle to produce beef in this country.
Livestock producers continue to liquidate herds like crazy. There’s no grass and the price of hay to feed cattle has skyrocketed. This means cattlemen can’t afford to pay for the hay so liquidation continues because there’s nothing to feed their herds.
To compound matters, the hay supply is dwindling.
By May 2012 projections place hay stocks at 10 to 12 million tons.
“That would be one of the smallest beginning hay stock levels we’ve seen during the last 30 years,” Nelson says. “This will drastically hurt the ability to rebuild cattle numbers in 2012 and 2013.”
Those cattle producers in Kansas who have feed and plan to keep their cattle will also hold onto this feed supply. These cattlemen are those primarily north of I-70 in the Sunflower State and into Nebraska.
Some of these producers who still have grass and hay may be asking themselves, is this a time to expand?
This is especially true with cattle prices remaining profitable.
Cattlemen who have the fuel to feed their herds may want to consider adding numbers now. Beef production will remain low as we head into 2012 and ’13.
There could be a secondary spike in prices during this time period because once the rains begin to fall again — and they will at some point in time — producers will pull their heifers off the market and keep them to rebuild their herds.
Those producers who can hold onto a few more heifers this year will be sitting pretty to sell calves in 2013 and ’14. Rebuilding this nation’s cattle herd will not happen overnight and may be painfully slow.
To date the present drought continues. Who knows when it will end.
One thing is certain, cattle prices are going to get wild next year. Beef prices are sure to follow.
