Drought, markets highlight beef cattle conference

Drought weighed heavy on the minds of cattle producers attending the 16th Annual Southern Plains Beef Symposium in Ardmore, Okla., in mid-August. Even though isolated showers have provided localized relief in some areas across the Plains, the hot, dry weather continues to severely stress pastures and livestock.

Bob Whitson, vice president, dean and director of the Division of Agricultural Sciences and Natural Resources at Oklahoma State University, discussed emerging issues and challenges facing the beef industry, such as climate patterns.

He said the Oklahoma Climatological Survey statewide annual rainfall history from 1895 to 2005 shows recurring wetter and drier historical periods and indicates the current drought will continue.

“The late 1980s and 1990s were a wet period in Oklahoma, according to this data. With the drought of 2001-2002, we are entering a new dry period,” he said. “Be thinking about management decisions, taking into account that it is going to be dry for a few more years, according to historical patterns.”

Whitson advised producers to think carefully about culling practices, perhaps culling deeper than they initially intended to. One reason to do so is for the sake of pasture conditions.

“If you beat that country into the ground, the cost could be high. The problem is getting good conditions back after you overuse the country,” he said. “You all have to be good managers to survive, and decisions you make are more critical in a drought.”

Even with lack of forages and water, hay shortages and increased input costs, Whitson said there's still some positive news — cattle prices are good; it's a prime opportunity to clean out ponds and “it is going to rain, we just don't know when.”

Growth in alternative fuels is another emerging issue Whitson thinks will affect beef producers. The mix of land use stands to change in the next 10 years as alternative fuel production ramps up.

“A stated federal initiative to replace 30 percent of current U.S. oil consumption with bio-fuels by 2030 could affect the amount of land used for feed grains as acreage shifts into production for bio-fuel stocks. We could see ethanol plants start to compete for grain, causing prices to rise. Who will be able to pay the most for grain? The cattle, hog, poultry or ethanol industries?”

Corn is only one source of alternative fuels, however. Switchgrass, a perennial warm-season grass native throughout North America, is an up-and-coming energy crop. It could provide new opportunities for producers to diversify into providing bio-fuel feedstocks, Whitson said.

Whitson advised producers to watch production certification programs, animal identification, globalization and free trade, consumer expectations and management issues.

“Face these issues. Be alert, use information resources and scientific findings and weigh your options,” he said.

Erica Rosa, an agricultural economist at the Livestock Marketing Information Center (LMIC) in Lakewood, Colo., discussed the market outlook and international trade issues.

“The theme today is a lot of different scenarios that can play out. A lot will depend on the moisture situation,” she said. “We've been dealing with drought since last fall, so it's nothing new, but it is more severe. Over 50 percent of U.S. pasture and range is rated poor or very poor. All major cow-calf areas are being affected by drought, which will affect the market differently.”

Rosa says the LMIC is predicting a “little” decline in cattle prices in 2006, and another slight decline in 2007, but “they aren't going that low.”

Heavyweight feeder steers are expected to average more than $100/hundredweight for the rest of 2006 before weakening in 2007 to the low 100s. Lightweight feeders will average well over $120 per hundredweight through the end of 2006, declining in 2007 but staying above $110 per hundredweight.

LMIC forecasts that fed cattle prices will stay in the mid-80s per hundredweight for the rest of 2006 with a modest decline in 2007, most to come in the first quarter.

“Corn prices will affect feeder steer prices, and fed cattle prices will be affected by the meat supply,” Rosa said. “Calf and yearling prices will come down next year due to corn cost. Corn won't be as expensive as it has been in past years, but it will not be as cheap — we won't see two-dollar corn or three-dollar corn, either.”

As stores in Japan resumed selling U.S.-produced beef in August, Rosa reiterated the importance of trade.

“Trade has become a key factor and it's here to stay,” she said. “We can't ignore the Asian markets like Japan and Korea.”

Rosa said only 10 percent of the U.S. beef supply currently meets Japan's requirements, and it is going to take a good while to rebuild that market. She is looking to Korea as the “hot seat.”

“Prior to 2003, Korea was the third-largest foreign market for U.S. beef after Japan and Mexico, so you can understand why it is an important market at this point,” Rosa said.

In January 2006, the South Korean government agreed to allow imports of U.S. beef from cattle younger than 30 months, but the process has stalled over details of meat safety measures and procedures. However, South Korean officials say negotiations are nearing completion.

“It has been a long and tedious process in reopening that market to U.S. beef, but it is the next step now that the Japan market has reopened,” Rosa said.

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