September 19, 2007

High feed costs restrict US beef herd expansion

Though prices of calf and improved forage conditions should have expanded US cattle herd, high production costs due to increasing feed have curbed producers' interest to produce more beef, says Kansas State University James Mintert.

As the country already had nine years of positive returns for cow-calf producers, it should suggest beef cow expansion but economic incentives are not as strong, Mintert said.

He, along with Kansas State agricultural economist Rodney Jones, cite a recent survey, which indicates lease rates on summer pasture in Kansas have climbed 16 percent in the past five years. Interaction with producers shows that in many cases, rates have increased faster than that, the economists said.

Reduced forage options due to several years of drought have been largely responsible for holding back beef cow herd expansion, Mintert said. Albeit improved weather situations in some cattle areas, it worsened in others.

Surging corn prices are another "input" that have made cattle producers reluctant to expand herds, Jones said. He said in the past, the increase in corn prices would only stay up for a few months -- not long enough to influence forage programme prices significantly.  That situation has changed because of strong corn demand from ethanol producers, livestock feeders and export markets.

Corn demand will ultimately impact grazing rates as corn growers are pressured to put pastureland into crop production, and as there is increased demand for forage-based production systems, Jones said.

Apart from feed, cattle producers are also facing higher fuel and utility costs, said Mintert. Based on current data and with no immediate relief in sight for high fuel prices, Jones and Mintert said they expect little to no expansion of the US cow herd in the near term.