"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 to town." 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, Texas."
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 August.
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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.
[Text from
file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences] |