Future of the Feedlot Industry

April 25, 2015 02:26 AM
 
Future of the Feedlot Industry

Change is inevitable, but what will the future hold for feedlot production?

Cattle feeding has been a dicey business the past few years, with drought reducing herd numbers and fluctuating beef and corn prices making it difficult to gauge profitability. Feeding cattle has also come under fire from environmentalists for air quality and from animal activists for handling practices. Despite those concerns, feedlots are an integral part of the beef industry. But what will their role be going forward?

At the National Cattlemen’s Beef Association Cattlemen’s College in February, Pete Anderson, director of research at Midwest PMS, gave producers a glance into the future of cattle feeding.

First, a smaller cow herd means fewer calves to feed. The number of cattle fed in the U.S. has decreased approximately 375,000 head per year from 2000 to 2014.

Anderson keeps tabs on the number of feedyards that have left the business, shifted to growing cattle or moved to dairy heifer development. In the past six years, 69 yards have stopped finishing cattle for beef production. That accounts for 950,000 individual bunk spaces removed. 

“We’ve still got over capacity,” he says, adding more feedlots closing “is likely, even with a small rebound in the size of the cow herd.”

Despite fewer cattle at the bunk, beef production has been able to keep up—thanks to more weight being added at the feedlot and better genetics. Since 1975, beef carcasses have increased 5.5 lb. per year. 

Anderson says if the beef industry is going to make more beef and increase revenue, carcass weights will have to keep increasing to make up for smaller cattle inventory.

Cattle haven’t just gotten bigger, they’ve also been performing better when hanging on the rail. According to USDA data nearly 61% of cattle graded Choice or Prime in 2000. Jump forward to 2013 where 71% of cattle were graded Choice or Prime.

High prices and heavy weights mean that individual animals are worth a lot of money. Those high value cattle will be managed differently with revenue as the focus. Anderson says systems to improve the predictability of performance will come at a premium. 

“Feeding cattle will be more than just reputation and feeding experience in the future. It will require documentation and proof,” he adds.

Cattle and beef prices should remain high, he adds. Feeder cattle should also continue to command high prices as long as corn doesn’t return to $8 per bushel.

“As long as corn stays within a trading range, feeder cattle are going to be very valuable, and it is going to be fun to be in that part of the business,” Anderson relates.  

World population and economic growth also pose a tremendous opportunity for beef production.

In 2014, exports accounted for $352 in per head value, the highest amount ever. Exporting beef is also the most profitable way to export U.S. corn, Anderson says. “It is way better than putting corn on a ship and sending it somewhere,” he says.

The beef industry must facilitate this by exporting premium beef products and importing low cost, lean trim for grinding beef. “I see the next two decades as the best in the history of the beef industry,” Anderson says. “This may be the greatest opportunity in the history of animal agriculture.” 

 

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