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Weather Affecting Most Every Aspect of U.S. Cattle Market

09:50AM May 16, 2011

By Donald Stotts, Oklahoma State University

Weather in the United States has been making a complicated 2011 cattle market even cloudier, ultimately affecting everyone from producers to consumers.

“Just about everything has been affected, from supply impacts to demand inputs to input market impacts,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist.

Demand by the public

Beef demand by the American public has been negatively affected by the cold, wet weather across much of the United States this spring, resulting in a lack of good outdoor grilling conditions in a number of states. Even in many warmer climes, drought conditions and the potential for wildfires have resulted in burn bans restricting outdoor activities and cooking.

“Memorial Day weekend and the weeks that follow will be critical in determining if beef demand will show a more typical seasonal pattern,” Peel said. “Hopefully, conditions will improve and the grilling season can get underway in a more historically normal fashion.”

Grain supplies

Then there is the uncertainty over feed grain supplies, which continue to be hampered by cool, wet weather delaying crop plantings across significant areas of the country.

“Each day of planting delay is likely to have noticeable impacts on corn yields,” Peel said. “There seems to be little likelihood of any relief for cattle producers from high feed prices.”

Forage conditions range from ample moisture for pasture growth to areas that are too wet to harvest hay, to the increasingly severe drought conditions in parts of the southern Great Plains.

But perhaps the most difficult assessment is the effects weather continues to have on the supply side of the market, in both the short- and long-term.

“Certainly, limited feeder supplies will maintain upward pressure on feeder cattle prices, but the question of just how much pressure depends on the bigger question of herd rebuilding,” Peel said. “That question, in turn, depends on what the industry is trying to do and well as what Mother Nature will permit us to do.”

Complicating matters further is that the answers to these questions will vary regionally. For example, in the U.S. Department of Agriculture January cattle inventory report, both beef cow and beef replacement numbers increased in the northern Great Plains and Rocky Mountains. With good moisture conditions, these areas are expected to continue herd expansion in 2011.

However, beef cow numbers at the beginning of the year decreased sharply in Missouri, Iowa, Kentucky, Louisiana, Texas and Oklahoma. Some analysts suspect that in the first three states the decline may reflect increasing competition with crop production and long-term shifts in beef production away from the region, though it will be some time before such impacts can be confirmed.

In the other states, Peel contends the decrease likely reflects continuing drought conditions that have spread from Louisiana and eastern Texas across much of Texas and parts of Oklahoma, New Mexico and eastern Colorado this year.

“Persistent drought conditions in the southern Great Plains can easily overwhelm any herd expansion that takes place in other areas, particularly if beef cows continue to move out of the Midwest,” Peel said.

Even without widespread drought conditions, the prospects for beef cow herd expansion in 2011 were limited at best; with the drought, net liquidation of animals is increasingly likely.

“This may limit demand for replacement heifers and thus reduce feeder supply pressure a bit in 2011 and slightly temper feeder prices this year,” Peel said. “However, another year of herd liquidation means that the general tight supply environment that supports cattle prices today will persist even longer into the future.”

In other words, herd expansion may well be delayed until 2012 and is likely to proceed slowly when it does start. In turn, cyclically high cattle prices are likely to persist into the mid-decade period at a minimum and very likely beyond.