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Maintaining U.S. Beef Industry Competitiveness with High-Priced Grain

Maintaining U.S. Beef Industry Competitiveness with High-Priced Grain. Derrell S. Peel Breedlove Professor of Agribusiness And Livestock Marketing Specialist Oklahoma State University. Major Beef Industry Issues. Changes in U.S. Agriculture Increased Global Demands on Agriculture

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Maintaining U.S. Beef Industry Competitiveness with High-Priced Grain

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  1. Maintaining U.S. Beef Industry Competitiveness with High-Priced Grain Derrell S. Peel Breedlove Professor of Agribusiness And Livestock Marketing Specialist Oklahoma State University

  2. Major Beef Industry Issues • Changes in U.S. Agriculture • Increased Global Demands on Agriculture • Current U.S. Beef Market Situation • Long Run Structural Change in the U.S. Beef Industry • Other Issues • Environmental, animal welfare, local foods, etc

  3. U.S. Beef Industry Opportunities and Challenges • Ability to use forage implies an important role in meeting global food demand • High grain prices means that the beef industry must adjust production systems • Beef industry must take advantage of flexibility in production to maintain competitiveness

  4. Livestock Marketing Information Center Data Source: USDA-NASS

  5. Livestock Marketing Information Center Data Source: USDA-AMS, Compiled & Analysis by LMIC

  6. Livestock Marketing Information Center Data Source: USDA-NASS

  7. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

  8. United States: Beef Trade

  9. U.S. Beef Exports Major Markets

  10. Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC

  11. Livestock Marketing Information Center Data Source: USDA-ERS & USDA-FAS, Compiled & Analysis by LMIC

  12. U.S. Agricultural Challenges • Agriculture is being asked to do more of everything… • Biofuels • Global food demand • …with more restrictions and challenges • Environmental limitations • Anti-science/anti-commercial mentality • Social agendas that threaten agriculture • Resource pressures in agriculture • More competition among crops for acres • More competition from crops for forage and hay production • High and volatile input prices

  13. Corn for Food, Seed and Industrial Use

  14. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC

  15. Corn PriceOmaha, Monthly, Jan 2000-Jun 2012

  16. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Forecasts by LMIC

  17. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

  18. Change in Planted Acres, 2006 -2012Based on 2012 Planting Intentions

  19. Increased Crop Values$/bushel, Crop Years

  20. Short and Long Run Impacts of High Grain Prices on Beef Cattle • Short Run • Adjustments within current production systems • Tweaking the current system • Other factors dominating • Current market situation • Long Run • Adjustments to new production systems • Different fundamental market incentives • Within the context of dynamic short market conditions

  21. Beef Production and Marketing System MARKETING PRODUCTION

  22. U.S. Cattle Industry Evolution1960s-2006 • Built on cheap energy and cheap grain • Increasingly grain intensive • Limited stocker role (more calves in feedlots) • Influence on production systems • Animal genetics (carcass weights) • Type and use of technology • Industry infrastructure (location and capacity) • Cattle feeding • Meat packing

  23. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

  24. Livestock Marketing Information Center Data Source: USDA-NASS, Compiled & Analysis by LMIC

  25. Cattle on Feed as a % of Feeder Supply, January 1

  26. “The Beef Industry Can Survive High Corn Prices Better Than the Pork and Poultry Industries” It is often said: • True statement? • What are the implications for the beef industry?

  27. Data Source: KSU Focus on Feedlots, Compiled by LMIC

  28. Estimated Concentrate Feed per Pound of Meat Produced • Broilers 1.80 • Hogs 2.90 • Beef (by feedlot placement weight) • 550 lb. 3.50 • 750 lb. 3.02 • 1000 lb. 2.39

  29. Beef Industry Market Coordination • Price Signals to Coordinate Production Sectors • Level of Production • Change Production System • Allocate Forage Resources • Grain versus Forage Use • Timing

  30. Feeder Cattle Prices, Average, OKC, January 1992-December 2011

  31. Price Signals in the Beef Industry • Cow-calf Production • Increase or decrease cattle production based on calf prices • Stocker Production • Increase or decrease forage use based on price relationship between light and heavy feeder cattle • Feedlot Production • Increase or decrease grain use based on grain price and relationship between light and heavy feeder cattle

  32. Price-Weight RelationshipMedium/Large No. 1 Steers

  33. Feedlot Cost of GainKansas, $/cwt.

  34. Cattle Markets are Providing Twin Signals to U.S. Producers at the Current Time • Increase Calf Production • Herd Expansion • May change in 3-6 years • More Stocker Production • Keep feeder cattle on forage longer • More flexibility • Likely to be permanent • Both Signals Imply Increased Demand for Forage

  35. Permanently Higher Grain Prices is a Game Changer for the U.S. Beef Industry • Change from grain intensive to forage intensive to maintain competitiveness • Must emphasize ruminant advantages • Will continue to use grain finishing but in a less intensive way • Enhanced role for stocker production • Influence on production systems • Animal genetics (change animal size?) • Type and use of technology? • Better forage management • New forages and new forage systems? • Industry infrastructure (location and capacity) • Different feeding industry? • Regional shifts in cattle feeding, cow-calf and stocker production

  36. Potential Structural Change in the U.S. Beef Industry

  37. Change in Beef Cow Inventory, January 1, 2007-2012 -18.1% +5.4% -8.3% -9.9% -1.4% 0.0% -2.0% -0.9% -3.5% +0.9% -2.6% -11.4% +6.7% -0.8% +4.9% -2.9% -22.5% -16.7% -4.1% +3.3% -4.9% -11.8% -15.4% -11.4% -8.2% -15.7% -1.75, 2011 -17.6% -7.5% -1.3% -9.4% -5.4% -12.5% -0.4% -5.4% -16.4% -3.7%, 2011 -7.8% U.S. Ave., -8.5 % -1.1%

  38. “The Beef Industry Can Survive High Corn Prices Better Than the Pork and Poultry Industries” • True, but with implications • Ruminant flexibility is an advantage only if the industry changes to capitalize on those capabilities • Failure to change is a disadvantage • Ruminants will always be the least efficient user of grain

  39. The U.S. Beef Industry Faces New Questions • For the last 4-5 decades: • “How can we get cattle to use more grain?” • For the coming decades: • “How can we produce high quality beef using the least amount of grain?”

  40. The Weekly Email NewsletterFrom OSU Animal Science and Agricultural Economics Send Email to derrell.peel@okstate.edu

  41. Thank you!

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