"Drought has been particularly cruel to the beef cattle
industry," Hurt said. "A multiple-year drought in the southern
Plains has been followed by a devastating Midwestern drought in
2012 that is now forecast to continue into 2013. Brood cows
remain the last major livestock industry that is land-extensive.
So when dryness causes wide stretches of land to be unable to
support cow grazing, producers have to buy feed or send the cows
In reviewing the year, Hurt said the 2012 drought
began in the eastern Corn Belt in the spring and early summer
but migrated westward in the late summer and fall. According to
the U.S. Drought Monitor, drought conditions still cover 62
percent of the lower continental United States. The central
Great Plains has become the epicenter, with Nebraska having 95
percent of the state in the worst two drought categories. In
addition to Nebraska, six other states -- Kansas, Oklahoma,
Colorado, Wyoming, South Dakota and Iowa -- have more than 50
percent of their area in the worst two drought categories:.
These states represent 30 percent of the nation's beef cows.
"While some important beef cow areas have gotten relief from
the drought, others have a discouraging outlook," Hurt said.
"Improved moisture conditions began in August and have continued
into the fall in the eastern Corn Belt and the Southeast.
However, the forecast is for the drought to continue and
possibly intensify into the winter for the area of the country
that is west of a line roughly from Chicago, Ill., to Lubbock,
Hurt said that beef cow numbers are likely to be 2 to 3
percent lower in the upcoming January inventory report. The
midyear estimates were already reflecting a 4 percent decrease
in the national beef cow herd, and that was before the impacts
of the 2012 drought began to be felt. The implications are for
continued cow reductions until feed and forage supplies are
restored. USDA is currently reporting 55 percent of the nation's
pastures and ranges in "poor" or "very poor" condition, the
lowest two categories.
According to Kansas State University, negative returns for
feedlots have continued, with losses over $200 per head. High
feed prices, a small calf crop and excess capacity in feedlots
have all contributed to these large losses. Placements of calves
in September were down 19 percent from a year ago.
Significantly, this was the smallest number of cattle placed in
feedlots with capacity of 1,000-plus head since USDA began the
current series in 1996. The low September placements follow
about a 10 percent reduction in placements in both July and
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"As a result of the slowing placements in the past three months, the
number of cattle on feed dropped to 3 percent below year-ago levels
on Oct. 1," Hurt said. "Cattle on feed will play a role in rationing
the short corn supply. The current 3 percent reduction in on-feed
numbers contrasts with only a 1 percent expected reduction in
on-feed numbers in USDA's grain-consuming animal unit calculations
for the 2012-13 marketing year. Cattle on feed represent 23 percent
of the total USDA grain-consuming animal units," he said.
"The cattle-on-feed numbers were supportive to the overall
expected reduction in per capita beef supplies of about 3 percent
through the first half of 2013," Hurt said. "As a result, finished
cattle prices are expected to continue to rise this year and into
2013. For the just completed third quarter, steer prices averaged
near $120 per hundredweight. Prices are expected to be near $125 for
the final quarter of 2012 and $130 in the first quarter of 2013.
Spring prices may peak in the higher $130s with the second-quarter
average in the mid-$130s. Record-high cattle prices will be in store
for 2013, with prices now expected to average in the very low $130s,
compared to an expected record this year near $122," he said.
Hurt said that calf prices will be slower to recover due to high
feed prices, which will continue to depress calf prices until feed
prices begin to moderate.
"That moderation could begin in a small way with lower soybean
meal prices in the spring of 2013, assuming reasonable South
American soybean production," Hurt said. "Further declines in feed
costs could occur with a better grazing season in the spring and
summer of 2013 and a return to larger U.S. corn and soybean crops
next year," he said.
Hurt said that a more abundant feed supply in the second half of
2013 could result in a robust price recovery for calf and feeder
cattle prices. Replenishment of feed supplies would also begin beef
cow expansion in late 2013.
from the University
of Illinois College of Agricultural, Consumer and Environmental