KANSAS CITY, Mo. – While the effects of the 2012 drought have mostly come to an end for grain producers with forecasts of a record large 2013 corn crop as an example, the impact still is being played out in the livestock industry as tight cattle supplies have pushed feeder cattle futures and cash slaughter cattle prices to record highs and continue to support retail beef prices that hit record highs a few months ago.

Prices paid by meat packers for cash cattle reached record highs the week of Oct. 21 near $135 a cwt. for live cattle weighing 1,100 to 1,400 lbs. in the Midwest and south Plains and near $210 a cwt. on a dressed basis (carcass) in the Midwest, up sharply from August lows. Strong cash cattle prices were a key mover of live cattle futures traded at the CME Group. The nearby October contract touched a 2013 high of $134 a cwt. on Oct. 25, up about $10, or 8 percent, from late August. Feeder cattle futures, meanwhile, hit record highs near $170 a cwt. in mid-October.

During the partial federal government shutdown, the US Department of Agriculture did not report daily livestock and meat data from Oct. 1-16 and skipped or delayed some key October reports, including the key Cattle on Feed report.

In its September World Agricultural Supply and Demand Estimates, the USDA projected 2014 beef production at 24,150 million lbs., down 5.7 percent from 2013, which was down 1.2 percent from 2012. At the same time 2014 pork production was projected to increase 3.2 percent from 2013, with output this year seen up 0.6 percent from 2012. Broiler production was projected to increase 2.5 percent in 2014 after posting an expected gain of 2.1 percent in 2013.

“Monthly retail beef prices set successive records in July and August,” the USDA said in its September Livestock, Dairy and Poultry Outlook. “August retail Choice beef prices reached $5.39 per lb., and all-fresh beef reached $4.97. Despite the price-dampening pressure from competing meats, generally declining year-over-year beef supplies will result in retail beef prices that are likely to remain near current levels for some time.”

As production declines and prices rise, per capita beef consumption continues to fall. Per capita consumption in 2014 was projected by the USDA at 54 lbs. (retail weight), down 4.8 percent from 2013, which was forecast down 1.2 percent from 2012. Per capita pork and broiler consumption were forecast to increase both years.

Total cattle numbers have been trending downward for decades, with intermittently sharper moves due to weather or other factors, and multi-year cycles of peaks and valleys. In its Feb. 1 Cattle report, the USDA estimated the total US cattle and calf inventory at 89.3 million head, down 2 percent from Jan. 1, 2012, and the lowest since 1952. The beef cow herd on Jan. 1 was down 3 percent while milk cow numbers were unchanged.

“The beef cattle industry has been downsizing for several years,” said Chris Hurt, Purdue Univ. extension economist. “Continued excess capacity (in feedlots and meat packing) likely means one to two more years of downsizing. Then, if beef cow numbers begin to slowly turn upward in 2014, downsizing of cattle feeding capacity may end in 2015 and in the packing industry in 2016.”

The cattle herd was thinned even more rapidly during the 2012 drought as pastures dried and supplemental feed prices became too high. Corn prices hit record highs in August 2012. The liquidation of cattle during the drought actually increased beef supplies for a time as more cattle were sent to slaughter, but the reverse is true as herds are rebuilt. As additional heifers are held back for breeding the number of total cattle sent to slaughter declines and the beef supply tightens. It takes years to rebuild herds that were reduced in just months because cattle have the longest gestational period of the common meat animals. Production of hogs may be increased in months and of broilers in just weeks.

Other factors also have contributed to the decline or will affect the beef supply. The recent blizzard in the Upper Midwest resulted in the deaths of as many as 100,000 cattle and may add a few cents a cwt. to cattle in the region next year, but the overall impact is expected to be minimal because the death loss lost was a small fraction of total cattle numbers (about 1/10th of 1 percent of the total), according to market analysts.

Perhaps a greater impact may come from the recent decision by some meat packers to no longer accept cattle for slaughter that have been fed Zilmax, an approved feed additive that improves feed conversion in cattle, because of issues related to meat quality and animal welfare. Recent lighter slaughter weights have been attributed by some to the withdrawal of the feed additive, largely offsetting heavier slaughter weights that may be expected due to lower feed costs.

Global beef supplies also are tight, according to the USDA, resulting in lower US beef exports from preceding years in both 2013 and 2014 and modestly higher US beef imports for both years. Imports and exports, each at about 10 percent of total beef production, tend to mostly offset each other in total weight, although the types of products traded are different.

Taken together, the signs indicate continued tight cattle numbers and high cattle and beef prices for at least another couple of years.