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Major 2012 drought is shaking Missouri’s beef industry

Posted on Wednesday, October 24, 2012 at 10:30 am

Less cows means more money spent on the meat bill at the grocery store.
John Kleiboeker, executive director of the Missouri Beef Industry Council, said people will pay more for ground beef, steaks and other beef products as a result of this year’s record drought. He said a greater impact will be the effect on the state’s beef industry.
A drought-driven drop of more than 50 percent of Missouri’s corn yield teamed with hay and soy shortages have Missouri beef producers liquidating herds as a result of limited feed grain, and increased feed prices from the drought are pushing out-of-state feedlot operations to pay less per head for Missouri cattle.
“There is no doubt that (the drought) has a huge impact, especially on the fed-cow industry,”  said John Kleiboeker, executive director of the Missouri Beef Industry Council. “We’re very dependant on supply and demand. When things  get cheap, we don’t produce as much and when the price is good we produce more.”
Less beef, bigger bill
Kleiboeker said fewer herds begets less beef, which increases the overall price for beef products in the long-term — and the industry doesn’t have a quick turn around.
“It’s not like we can turn (the industry) around in six months — it’s a three-year process at best,” Kleiboeker said, referring to the time it takes grow a herd and rear cattle to the appropriate slaughtering weight.
“There’s no sign of a turnaround, there’s no incentive,” he said.
The USDA projected in February that commercial beef production would drop by 5 percent in 2012 and another 6 percent in 2013 before leveling out to 2011 numbers by 2016, this being before major impacts of the drought surfaced —  of which Kleiboeker said will bring larger impacts for Missouri.
The USDA has called for a  4-5 percent increase in consumer beef prices by 2013. February projections forecasted increased beef prices to last until 2015, this also before major impacts of the drought hit.
The USDA reported in August a 5.4 percent jump in steak prices and a 6.8 percent jump in ground beef prices over the previous year.
Show-Me beef
Kleiboeker said Missouri beef production lies primarily in the cow-calf and stocker cattle stages of the Big Beef industry, where calves are reared from birth to about 500-600 pounds in the first stage and then field grazed in the second stage to about 800-900 pounds before being sold to out-of-state feedlots, or CAFOs.
“That’s the bulk of what Missouri’s business is made up of,” he said
Those CAFOs are primarily in Kansas, Nebraska, and Iowa, where Kleiboeker said an even greater impacts are expected as a result of feed shortages.
For Missouri, “as corn becomes more expensive, the feed lots tend to spend less on cattle,” he said, and the hit for Missouri  ranchers is the price per head of cattle received as less than 3 percent of the state’s beef production is in the CAFO realm.
“As crop prices increase as a result of the drought, it’s going  to impact our bottom line here in Missouri,” Kleiboeker said. “If feedlots pay more for feed, they’ll pay less for first-stage cattle.”
Along with the industry’s hit in the price per head of Missouri cattle, he said part of the big picture is the lack of grass and hay.
Ranchers are pinched between spending more money on grass or hay and selling cattle at lesser prices.
“One of the big things that affects how money gets spent is that (producers) are paying twice as much on hay,” Kleiboeker said. “That’s going to impact extra money being spent on other things,” which trickles into Missouri’s overall economy
He said agriculture is Missouri’s largest industry — beef production being right on top with ranches in all 114 counties of the farm economy.
“We’re predicting that there is going to be slimmer herds again next spring with the lack of both grass and hay,” he said. “That on the front end is the biggest factor.”
Silver lining
Kleiboeker said, although Missouri herds are in a state of liquidation, ranchers who do keep a hold of their cattle may see great profits when the market rebounds.
“You hate to speculate, but can’t help not to,” he said. “Fewer people will get to enjoy the silver lining. We’re seeing fewer cattle, we could see that all of this could cause an increase in the price (per head). We could see some fantastic prices as the numbers of cattle drop. Times could be really good for the cattle industry.”
He said there are a lot of people expecting there to be a turnaround in the Missouri cattle market and that there will be a time that conditions are better and people will want to repopulate their herds.