Grain production decrease expected while rebuilding cattle numbers
By Jennifer Carrico
Total meat production is down in 2013, which has lead to a rise in prices, but that isn’t expected to last for a long time, according to Dan Basse, president of AgResource Company.
“Beef prices in 2013 will gain 5.4 percent, pork prices will gain 3.5 percent, poultry prices will gain 5.7 percent and milk prices will gain 4.9 percent, but changes are ahead,” Basse told attendees to the Feeding Quality Forum held in Omaha, Neb. recently.
One change he expects to see is that North America will become energy self-sufficient between 2017 and 2020 and will be able to export some of that energy. Basse said this would have an impact on the U.S. economy in a positive way.
Basse thinks the United States will be No. 1 in energy production by 2017, followed by Iraq and then Canada. While this may cause more problems in the Mideast, it will allow the U.S. to be energy self-sufficient, stabilize prices and keep consumer goods affordable.
“If people have more money to spend, hopefully they will buy more red meat and food, which will help the U.S. economy and the agricultural economy,” he said.
Biofuels around the world have dramatically increased and he said at this point the U.S. does not need any more grain to feed the ethanol market.
“The fight between livestock and ethanol is over. We haven’t seen any new ethanol plants built in quite some time and I don’t think we will,” he said. “Big cities won’t be implementing E15 tanks because it takes too much time and money to replace the current tanks they have.”
In 2012, for the first time ever, Brazil exported more corn than the U.S. In the rest of the world, corn production has increased because of the high prices for corn. The U.S. share of the world corn, wheat and soy trade is at a record low of 28 percent.
World records are being seen with this year’s corn harvest. The Ukraine, Brazil and Argentina have had large increases in production and are near the 180 bushels per acre mark.
Basse said in the next few years, he would expect to see 12 to 15 million acres in the U.S. pulled out of grain production and put into producing something else in order to meet demand and keep prices at a profitable level.
“We could see 3 to 5 million acres put back into pastureland, which will help to increase the cowherd again,” he said.
Over the past three years, weather has had a huge impact on grain production, causing lower yields in drought areas. A similar cycle was seen in the 1980s, which causes some concern in his mind.
For 2014, he expects corn prices to drop to $3.25 to $5 per bushel and these prices could continue beyond 2014, if no change in acreage is seen. This will also cause a decrease in net farm income.
“We are already seeing a shift in prices with grain prices going down. There’s been a collapse in corn prices in the past 30 days, while livestock prices are moving higher,” he said.
With grain prices coming down, he said U.S. producers could expect to see a bullish market with beef production.
The cattle market has continued to fight for profitability over the past three years because of high feed prices.
Basse said it is important to stimulate a cowherd expansion in order to have more feeder cattle and cattle fed out to meet the meat needs.
Increasing cattle prices has meant more producers are sending heifers to the feedlots and feeding fat cattle longer to increase carcass weights, thus providing more beef for consumers.
A record low for beef production is expected for the fourth quarter of 2013, while U.S. beef end stocks fall to a 10-year low.
Basse suggests feedlot operators forward price feed needs to help with profitability.
“Fourth quarter prices are expected to be $134 to $138 per hundredweight, but $140 isn’t out of base,” he said. “We will need to see a slight decrease in numbers of feeder cattle in order to help rebuild the cowherd and produce more beef in the long run.”
Jennifer Carrico can be reached by phone at 515-833-2120 or by email at firstname.lastname@example.org