July 28, 2010

US cattle stock's freefall sees market in peril

The decline in US cattle herd numbers could lead to a change in consumer habits that could ultimately rob beef of its market share, says Purdue University Extension livestock economist Chris Hurt.

"The great news is that beef supplies will remain limited in 2010 and 2011. Smaller available supplies mean that consumers will have to pay more for beef and that cattle prices should remain strong well into the future-perhaps for 3 to 5 years. The unfortunate side of the story is that other meats are going to absorb some of beef's market share. 2011 pork availability will be up 1% to 2%, especially late in the year. Of course broilers are the ones that will quickly fill the beef and pork shortfall, with a 6% expansion in available supplies per person this year and a further surge of 3% next year," Hurt says.

As per USDA data, beef cow numbers are 2% lower against on-year. On top of that, ranchers report retaining 2% fewer heifers. This means beef herd numbers will continue to slip through at least 2011.

"Pit those numbers against the trends in the poultry and hog sectors, where expansion is the name of the game, and it could equate to less consumer demand for red meat and poultry, and that's likely to affect beef the most. Add to it the typical slowness of the cattle cycle and it could create an altogether different protein marketplace in the coming years," Hurt says.

"Once supplies are cut sufficiently, consumers have to pay higher prices for meat and poultry. Given these higher prices, consumers will eat less meat and poultry. If the long period of increasing consumption of meat and poultry has come to an end, the US market will have limited growth potential in coming years. If that is the case, the domestic market may only grow at about the same rate as the US population, which has been somewhat under 1% a year," he says.

Hurt adds that exports could be the key to restoring the market's balance.