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Greener Pastures Signaling U.S. Beef Supply Rebound

August 19, 2014
BT Stocker Steers 3
Drought is starting to recede in many of the top beef producing states.  

Drought is starting to recede in many of the top beef producing states.

Signs of a rebound in U.S. beef supplies are taking shape with the changing color of the pastures on Glen Cope’s 2,000-acre ranch in Aurora, Mo.

"It’s so green and lush," Cope, 35, a fourth-generation calf breeder, said of the knee-high grasses that feed his cows about 55 miles from the Oklahoma border. "We’ve been getting plenty of rain. 2014 so far has let us consider expanding once again and make up for the numbers that we sold off."

Pasture conditions in the U.S., the world’s largest beef producer, are mostly recovered from a 2012 drought that forced ranchers to shrink the domestic herd to a 63-year low. While it takes years to reverse a decline in animal supply, record-high beef prices and the increasing availability of cheap feed are providing incentives for some producers to begin expanding.

A production rebound would help slow beef-price gains that the U.S. government said will be the biggest of any food group this year except pork. Cattle futures that touched a record high in July already are showing signs of a shift, heading for their biggest monthly drop since before the peak of the drought. That signals lower costs for meat buyers including Ruth’s Hospitality Group Inc. and Hormel Foods Corp.

"Record profitability and good pasture conditions may be the combination that pushes us over to really see some expansion in cattle inventory," said Scott Brown, a livestock economist at University of Missouri in Columbia.

Forty-eight percent of pastures and rangeland were in good or excellent condition as of Aug. 17, the best for that time of year since 2010, the U.S. Department of Agriculture estimates.

Drought Easing
Topsoil in most states was wetter than the 10-year average as of Aug. 10, according to data from the National Weather Service and National Oceanic and Atmospheric Administration. Drought conditions have eased with 22 percent of the country, excluding Alaska and Hawaii, in severe drought on Aug. 12, down from 32 percent a year earlier, the U.S. Drought Monitor said.

Prospects for record U.S. harvests are also reducing feed costs for livestock producers. Cash corn prices will average $3.55 to $4.25 a bushel in the 12 months that start Sept. 1, down from as much as $4.50 a year earlier and the lowest since 2009, the USDA said in an Aug. 12 report. Sorghum, barley and oats also will decline.

Cattle futures fell 5.5 percent on the Chicago Mercantile Exchange this month to $1.48725 a pound, after touching a record $1.6075 on July 28. Feeder cattle, the young animals sold by ranchers to feedlots, slid 2 percent in August to $2.16225 a pound, after touching an all-time high of $2.2355 on July 31.

Parched Texas
While pastures are improving in much of the Midwest and the Great Plains, conditions are lagging behind in Texas, the biggest beef-cow producer. About a third of the state was in severe drought as of Aug. 12, and 34 percent of its pastures were in good or excellent condition, trailing the national average.

Even in areas with better conditions, expansion of beef output will be slow. The gestation period for a calf is about nine months, and it takes as long as two years for an animal to reach slaughter weight.

Tight supplies mean a "structural bull market" will last a few more years, Christopher Narayanan, Societe Generale SA’s head of agricultural research, said in a July 29 report.

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