CHICAGO, Ill. (Reuters) — U.S. beef could be relegated to a “niche” item in 10 years if ranchers do not act to reverse the seven-year slide in the nation’s herd, says a leading U.S. cattle analytics firm.
The herd is at the lowest level since the early 1950s.
At stake are cattle and beef prices, which are forecast to surpass already record highs, and an expected surge in U.S. beef exports.
“If our industry doesn’t respond to the economic signal that suggests we are in a bull market and grow, then we’ll become more of that niche or specialty market 10 or 20 years down the road,” said Randy Blach, chief executive officer of CattleFax.
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He called beef a “centre-of-the-plate” item but said that could change if the herd continues to decline amid increased pressure from competitively priced pork and chicken.
Ranchers and feedlots recently focused on their profits after cattle prices in the U.S. Plains hit a record high $150 US per hundredweight, partly because of tight supplies.
At the same time, prices for wholesale Choice and Select beef cuts peaked at a record $240.73 and $237.32, respectively, based on U.S. Department of Agriculture data.
“The stars are aligned. We need to strike while the iron is hot. It’s time to expand the nation’s cattle herd,” said Blach.
Cattle and beef prices soared this winter after packers shut plants over the year-end holidays. Packers and feedlots had fewer cattle to draw from after bouts of harsh weather slowed animal weight gains.
Moreover, years of drought sent corn costs to record highs in 2012, which helped whittle down the nation’s cattle herd to a 63-year low of 87.730 million head.
A government report issued late last month suggests ranchers are replenishing their herds at a slower pace than expected as still expensive feed stretched into the first half of 2013 but eased in the following months.
Reduced supplies will put the industry on track to process 25 million head of heifers and steers this year compared to 30 million in 2000, which Blach said is forcing packing plants and feedlots to close.
Cargill shuttered one of its Texas processing plants last year and plans to close a feedlot in the state this summer. National Beef Packing Co. set April 4 as the last day of operation at its facility in Brawley, California, citing scarce supplies.
Producers who had been hurt by drought are now caught between cashing in on high cattle prices in the short term or gambling on the future, knowing that anything can happen in the 2 1/2 years it takes to produce market-ready cattle.
Blach said now is the time for producers to seize the moment, given more affordable feed and expanded U.S. beef access to global markets.
He said the U.S. beef export market accounts for 11 percent of domestic beef production but $307 of the value of every head of cattle generated in the United States.
Blach urged ranchers to seize the opportunity offered by a growing global population that over the next six years is predicted to swell by as many as 400 million people.
“That spells opportunity,” he said.
