Effects of 2012 drought will impact beef and pork prices, supply
By Randa Wagner
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.
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.
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.
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.”
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.