Green acres

by MEAT&POULTRY Staff
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USDA’s end-of-May pasture report gives a good or excellent rating to 58% of total U.S. pastures, an improvement from 51% a year ago, and it is the best May 31 pasture report in 10 years.

Gregg Doud, chief economist for the National Cattlemen’s Beef Association, agrees with USDA’s assessment. "I think that, overall, our pasture conditions right now are better than they’ve been in the past five years," he told MEATPOULTRY.com. "Generally speaking, the only big problem right now is in south Texas, which is still being affected by drought."

Pasture conditions can be an indicator for future cow-calf production and cow slaughter, and Doud cautions that while the current pasture report may be rosier than it has been in a long time, the volatile economic climate seems to be changing, or at least calling into question, some of the old assumptions that have governed cow-calf production and cow numbers for decades. "In 2008, cattlemen lost more money feeding cattle at any time in history. Their appetite for risk has been destroyed," he commented.

Up to this season, pasture conditions have been damaged by droughts that dry up first one area, then another. Over the past two years, drought has all but ruined pasture in the southeast U.S. California has also been affected, and Oklahoma’s pastures dried up in 2007. Before that, an extended drought challenged pasturing in the Intermountain West. The droughts helped cause an 18% reduction in beef cattle numbers across 2007 and ’08, according to Doud. "When you move these droughts around the country, it takes years to build up the herd numbers again in those areas affected by drought," he said.

But, he added, the four-year 2003-2007 period was quite profitable, overall, for cow-calf producers, who depend on good pasture conditions. Oddly, however, cow-calf numbers didn’t expand in those four years. Then in 2008 the bottom fell out; the economist described the year as "weak," and predicts 2009 will be weak to poor in terms of profitability. "Cost inputs are significantly higher for cow-calf producers right now, and they’re not able to recoup those costs on the selling side," he told MEATPOULTRY.com.

That situation has banks advising producers to hang on to heifers rather than sell them, he said, which will reduce cow-slaughter numbers, although evidence so far is anecdotal. "The first real indication will be whether or not there’s a decline in heifer placements at feedlots," according to the economist.

According to USDA, weekly total cow slaughter for the week ended May 16 was down 6% from a year ago, to 110,413 head, though dairy-cow slaughter increased 7.6% to 47,581 head. Beef-cattle slaughter dropped 14.2% from a year earlier to 62,832 head.

Among beef economists, Doud said, "the coffee-shop talk is this: the industry consolidated at the packer level in the 1980s and at the feedlot level in the 1990s, but there has never really been a consolidation at the cow-calf level. Could it happen? I don’t know – and I want to emphasize that -- that I don’t know. But a lot of people are asking this question rhetorically."

A cow-calf consolidation would occur, he noted, for the same reasons the packers and feedlots—and retailers before them—consolidated: the gain the efficiencies from economies of scale. From low margins but high volumes, in other words. "It’s the next, and last, link in the chain. On the surface, consolidation would seem logical, since every other link has already consolidated. But it hasn’t happened yet and it still may not. The question is coming up for discussion, though," he said.

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