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• Given the current lackluster level of profits and immense uncertainty in the U.S. general economy, cattlemen will likely continue to liquidate cattle numbers until profitability can be achieved.
The U.S. beef cow herd is expected to continue to decrease in the coming months and year, primarily due to a lack of profitability, high production costs, competing meats, and alternative uses of land.
The lack of profitability by the majority of cow-calf producers can be attributed to weak demand caused by the severe recession, says Walt Prevatt, Auburn University Extension economist.
High production costs, says Prevatt, include those for feed, fertilizer, labor and land rents. “We’ve also seen pasture acreage moving into grain production and/or conservation programs and other non-farm uses such as recreation and rural non-farm development. Given the current lackluster level of profits and immense uncertainty in the U.S. general economy, cattle farmers will likely continue to liquidate cattle numbers until profitability can be achieved,” he says.
On the brighter side, U.S. beef exports during 2010 are expected to increase to 2.3 billion pounds — up 21 percent over the previous year — due to a significant recovery by the majority of U.S. trading partners and a weak dollar.
“However, U.S. beef exports during 2011 are expected to decline slightly due to financial market weaknesses among several trading partners,” says Prevatt. “Exports beyond 2011 are expected to be gradual as world economies recover from recessionary conditions. Any increase in the levels of U.S. exports of beef and/or competing meats such as pork or poultry will likely have a significant impact on U.S. beef prices during the next couple of years.”
U.S. cattle farmers clearly are continuing to decrease their inventory of cattle and calves, he adds. In the mid-year July 1, 2010 Cattle Report, cattle producers told USDA they had about 500,000 fewer beef cows that had calved (-1.6 percent) than a year ago. Beef cow replacements were down 100,000 head (-2.2 percent) from a year ago at 4.4 million head. A decrease in beef cow replacements and beef cows that have calved during 2010, says Prevatt, suggests that herd liquidation will continue in 2011.