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

Explore challenges and opportunities in the U.S. beef industry due to grain prices, market dynamics, and production systems. Learn about market coordination, forage demand, and the impact of grain prices on beef production.

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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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