July 28, 2008

Rising costs may slow US beef production

Beef production in the US may decline as feed costs have jumped 40 to 60 percent over the last two years, said a Kansas agricultural economist.

James Mintert, a Kansas State University agricultural economist, said while rising feed costs have been absorbed by livestock producers so far, higher prices down the marketing chain or herd reduction will be unavoidable in future.

He added that some extent of herd reduction was already evident in 2007, with the beef cow herd down about one percent. Slaughter data through early July 2008 also suggested that liquidation is under way and may have accelerated since January.

A monthly survey of feedlots by the Kansas State Department of Animal Sciences and Industry showed that the cost of feeding cattle in commercial feedlots averaged 74 cents per pound in 2007, up from 54 cents in 2006.

Cattle feeding returns estimated by Iowa State University show that cattle feeders experienced the largest loss of US$167 per head during February this year.

This is despite the fact that large cattle prices in Kansas reached record highs in 2007, averaging US$93 per cwt, 8 percent higher than in 2006.

With US beef demand weakening since 2004, Mintert said losses driven by rising costs is likely to induce herd reductions and the exit of some producers from the industry.

Although current beef exports were higher since 2004, when US beef was hit by the mad-cow disease, it still falls short of volumes before the disease, said Mintert. He cited data that US beef exports from January to May this year were 34 percent lower than the same period in 2003.