Livestock Outlook Appears Tight for 2012

US - Consumers should expect little relief in the price of a T-bone steak as cattle producers continue to decrease their herds because of soaring feed prices and a weak economy. Dr James Mintert, professor of Ag Economics and assistant director of Extension at Purdue University, spoke earlier this week at the American Farm Bureau Federation’s 93rd Annual Meeting.
calendar icon 11 January 2012
clock icon 2 minute read

High demand for ethanol has forced the price of corn to nearly double in the past few years, driving livestock production costs up and putting cattle producers in the red. They’ve responded by raising fewer cattle, according to Dr Mintert.

“Beef producers are recouping production costs by putting less meat on consumers’ plates,” Dr Mintert said. “Fewer pounds of meat mean higher prices throughout the system.”

From 1925 to 1975 the beef industry was relatively healthy, Mintert explained, as demand and production grew with the population and income growth. The span from1975 to 2011 looks a lot different, as the number of cattle dropped from 132 million head to 90 million in 2011.

“That’s the picture of an industry shrinking because of a lack of profitability,” Dr Mintert said. “This is an industry that has struggled to make money for a long time.”

A saving grace for the beef industry is the export market, which has rebounded from the lows in 2004 when a case of bovine spongiform encephalopathy was discovered in a US cow. The United States is now a net beef exporter.

“That has really helped hold down the number of pounds we put in front of consumers,” Dr Mintert said.

The pork industry, on the other hand, is much healthier, as production has increased 30 per cent during the last 20 years in the United States and Canada. Pork producers face the same challenges as beef concerning feed costs, and like beef producers, are putting fewer pounds of pork on consumer plates. The difference is pork exports. Today, almost one pound of pork in four goes to the export market.

“Export growth has helped pork see steady increases over a long period of time,” Dr Mintert said. “Pork exports were up 15 per cent this year over last year. They are up 54 per cent compared to 2007."

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