Effects of 2012 drought will impact beef and pork prices, supply

By Randa Wagner

editor@newscolorpress.com

Grain prices and sup­plies are on every producer’s mind these days, thanks to the dev­as­tat­ing drought that con­sumed half the nation this grow­ing season.

As has been well pub­li­cized, corn is used in 75 per­cent of the prod­ucts Amer­i­cans con­sume or use, whether directly or indi­rectly. While the increase in pack­aged and processed foods may take 10–12 months to real­ize their full poten­tial, ear­lier impacts for beef, pork, poul­try and dairy are likely.

Beef cat­tle and hogs eat corn; so do chick­ens and dairy cat­tle. Lots of it; espe­cially when, in the case of cows, pas­turage is not avail­able either. If a pro­ducer can­not afford to feed live­stock and water is in short sup­ply, he will cull his herd.

Short term, increased meat sup­plies decrease meat prices: good for con­sumers, right?

Yes, but the key words here are ‘short term.’ When pro­duc­ers can’t afford to feed stock and sell off half or all of a herd in Sep­tem­ber, it means prod­uct sup­plies will decrease later this year and into 2013. That decrease, in turn, brings higher prices with it.

Since about 80 per­cent of agri­cul­tural land in the U.S. expe­ri­enced drought in 2012, few pro­duc­ers escaped its con­se­quences. Accord­ing to the United States Depart­ment of Agri­cul­ture, ‘severe or greater drought impacted 67 per­cent of cat­tle pro­duc­tion, and about 70–75 per­cent of corn and soy­bean pro­duc­tion.’ As a result, over 2,000 U.S. coun­ties had been des­ig­nated as dis­as­ter areas by the USDA as of Sept. 12.

A sig­nif­i­cant increase in grain prices is evi­dent locally by review­ing num­bers from Pro­duc­ers Live­stock in Craw­ford County. Auc­tion prices on Oct. 6 of last year were (by bushel): Corn $5.80, Beans $11.07, and Wheat $5.91.

This year on Oct. 4, those same grains were: Corn $7.42, Beans $15.01 and Wheat $7.96.

We all know sup­ply and demand influ­ence prices of any prod­uct. Retail food price infla­tion has aver­aged 2.5–3 per­cent each year on aver­age for the past 20 years, says the USDA. Next year, how­ever, they antic­i­pate food price infla­tion to be between 3 per­cent and 4 per­cent, with increases cen­tral­ized in ani­mal prod­ucts: eggs, meat, and dairy. They note since July, egg prices have risen markedly and beef prices have fallen moderately.

Beef

As of Sept. 11, approx­i­mately 74 per­cent of cat­tle areas were affected by mod­er­ate or more intense drought. Feed­lot oper­a­tors are pay­ing lower prices for cat­tle because of high feed costs and increased sup­ply and lower prices of cat­tle being sent for slaughter.

Amer­i­cans love their beef. But what goes into rais­ing a beef or dairy cow directly affects the consumer’s wal­let. Reports of ‘alter­na­tive feed’ have been mak­ing their way into the news.

An arti­cle from Reuters in late Sep­tem­ber reported ‘bro­kers are gath­er­ing up dis­carded food prod­ucts and putting them out for the high­est bid to feed­lot oper­a­tors and dairy pro­duc­ers who are scram­bling to keep their ani­mals fed.’

The arti­cle said ‘cat­tle­men are feed­ing vir­tu­ally any­thing they can get their hands on that will replace the starchy sugar con­tent tra­di­tion­ally deliv­ered to the ani­mals through corn.’ This includes ‘cook­ies, gummy worms, marsh­mal­lows, fruit loops, orange peels, even dried cranberries.’

Ki Fan­ning, a nutri­tion­ist with Great Plains Live­stock Con­sult­ing in Eagle, Nebraska, told Reuters a rumi­nant (a cow) can take those type of ingre­di­ents and turn them into food.”

Ani­mal nutri­tion­ists cau­tion oper­a­tors must be care­ful to fol­low detailed nutri­tional analy­ses for their ani­mals to make sure they are get­ting a healthy mix of nutri­ents. But the report stated rumi­nant ani­mals such as cat­tle can safely ingest a wide vari­ety of feed­stuffs that chick­ens and hogs can’t.

Some oper­a­tors use dis­tillers grains, a byprod­uct that comes from the man­u­fac­ture of ethanol. Other com­mon non-corn alter­na­tives include cot­ton­seed hulls, rice prod­ucts, potato prod­ucts, peanut pel­let. Wheat “mid­dlings” that con­tain par­ti­cles of flour, bran, and wheat germ, are also used.

Bran Dill, a spokesman at Hansen Mueller Grain out of Omaha, Nebraska, says it all comes down to fat, sugar and energy. “That’s all it is,” he said, adding demand is high.

Dairy

High feed costs are expected to result in a small reduc­tion in milk pro­duc­tion in 2013 and slightly higher prices than this year. This is likely to affect all milk prod­ucts includ­ing cheese, yogurts, and prod­ucts using milk solids.

Pork

The USDA reported in Octo­ber hog far­row­ings (lit­ters of pigs) are expected to decline in the second-half of 2012 and the first three quar­ters of 2013 because of high antic­i­pated feed prices. Pork pro­duc­tion for 2013 is expected to be below both 2011 and 2012 at 22,905 mil­lion pounds.

Media reports in Sep­tem­ber of a pork short­age in early 2013 have since been dis­missed by the Amer­i­can Farm Bureau Fed­er­a­tion as “baloney.”

“Pork sup­plies will decrease slightly as we go into 2013,” Farm Bureau econ­o­mist John Ander­son told the Asso­ci­ated Press. “But the idea that there’ll be wide­spread short­ages, that we’ll run out of pork, that’s really overblown.”

How­ever, feed makes up about 60 per­cent of the expense of rais­ing a pig.

“I think we’re going to (still) see pretty sub­stan­tial liq­ui­da­tions of live­stock,” Steve Meyer, con­sul­tant to the National Pork Pro­duc­ers Coun­cil and National Pork Board told AP in early Octo­ber. Meyer guesses that 3 per­cent of the nation’s breed­ing pigs could be sent to slaugh­ter by next March. “And by my esti­ma­tion, that’s a big move.”

Over­all

Beef futures rose and pork rose on the Chicago Mer­can­tile Exchange in mid-October. With prices for pork and beef expected to rise next year, butch­ers are say­ing that con­sumers will have to pay more or get used to cheaper cuts of meat.

The USDA affirms heat stress, higher feed prices, and the poten­tial for reduced hog and poul­try inven­to­ries con­tinue to dampen the out­look for pork and poul­try pro­duc­tion into 2013. While there won’t nec­es­sar­ily be a ‘short­age,’ meat prices will be affected just as read­ily as other gro­cery items con­tain­ing soy and corn.

Randa Wag­ner is edi­tor of the Mor­row County Sen­tinel, 46 S. Main St., Mt. Gilead. She can be reached at (419) 946‑3010, ext. 203.

Posted by Rob Treynor on Nov 1 2012. You can follow any responses to this entry through the RSS Feed. Both comments and pings are currently closed.