Recent droughts have had a huge impact on the beef industry, Kate Brooks, University of Nebraska Extension livestock economist, told a group of producers at a Cornhusker Economic Outlook meeting in Norfolk recently. In 2011, extreme drought gripped the southern Plains states, and part of the cow herd in that region was liquidated, or cows were sent north to places like Nebraska where grass was abundant. The 2012 drought was even worse, expanding north into Nebraska and beyond, causing further herd reduction. Hay inventory in the drought stricken areas is extremely low, said Brooks.
"The 2012 drought affected about 70% of the cow herd," she said. "We won't see a big herd expansion until we see a drought reduction. This year, there might be even more reduction in the cow herd numbers, because pasture and rangeland are not going to improve overnight."
Brooks said that the southeastern U.S., where moisture has been ample, might see some herd expansion, but the cost of production is prohibitive at this time for much expansion, even when cattle prices are high. In fact, last year's calf crop was the 17th year in a row that the U.S. has seen a smaller calf crop than the previous year, she said. Because of these reductions, Brooks said we've lost feedlots with some closures throughout the country. Average return margins for cattle feeders remain very tight, with a little movement in the positive direction.
Brooks said that some of the herd and placement reductions have been offset by heavier carcass weights. "There are opportunities for good returns in the cow-calf sector" especially for low-cost producers, she said. "But in Nebraska, there is a concern about availability of forages."
On the flip side, pork producers continue to expand their breeding herd nationwide with a decline in sow slaughter as well, on hopes that feed costs will decline in the coming months. The pig crop has grown over the past few years because of more pigs being produced per litter, with commercial production growing a little over two percent last year, Brooks said.
Retail pork prices have continued to rise to record levels, but Brooks projected that retail prices will stay at about 2012 levels. Consumer prices in the U.S. for all meats are rising, but "the difference is that the prices are widening, with beef going up faster," she said.
In the dairy industry, small dairies continue to close and larger dairies are not expanding much, she said. Milk production has increased because producers are getting more milk per cow. "As a country, we're drinking less milk, but there is an increase in consumption of processed dairy products like cheese," Brooks said. U.S. dairy export values have been increasing over the past few years.
If you'd like to learn more about the livestock production outlook and markets for 2013, contact Brooks at [email protected].