The livestock industry is taking a direct hit by this summer’s drought, and that
will impact consumers’ wallets next year, says a University of Missouri
agricultural economist.
“I expect to see food inflation, but it will take time,” said Scott Brown,
research assistant professor in the MU College of Agriculture, Food and Natural
Resources (CAFNR). “The short term effects will be fairly muted for the
remainder of 2012, but we’re going to see food price increases in 2013 and maybe
into 2014 because of this drought.”
Brown expects to see an 8 percent rise in meat, dairy and poultry prices
next year.
The problem is that the drought has dramatically reduced the feedstuffs
that animal agriculture needs to raise cattle, swine and poultry. Corn yields,
Brown said, will probably suffer a 10 percent or more decrease compared to last
year. This has caused corn futures to jump to $8 per bushel in late July from
$5.50 per bushel at the beginning of June.
Soybean meal and hay prices, also staples as animal feed, have also reached
extremely high levels. “It is sobering to realize that 2013 feed expenses very
well could be three times higher than the 1990-2004 average, and 70 percent
above the 2007-2010 average,” Brown pointed out.
The livestock industry will experience a lot of short-term pain as it tries
to adjust, Brown commented. Some producers will have to exit the industry, he
said. Producers are already culling and slaughtering their existing animal
inventories to a level they can afford to feed.
To offset the rising feed prices, some producers are now using pasture hay
that is usually banked to feed cattle during the winter months.
“This creates an added uncertainty for the cattle industry in the hardest
hit areas,” Brown said. “Fall rains will be essential if any additional pasture
growth is to occur. If available forage supplies are difficult to source or
unavailable entirely, I expect to see herd liquidation.”
This shrinking livestock supply will mean less meat in grocery
refrigerators in 2013. “That’s certainly going to raise prices,” he said.
Brown said that the pork and chicken industries will fare worse because
there are not many substitutes for their rations of corn and soybeans.
The U.S. Department of Agriculture in August added nearly 220 counties in a
dozen drought-stricken states to the government's list of natural disaster
areas. Counties in Arkansas, Georgia, Iowa, Illinois, Indiana, Kansas,
Mississippi, Nebraska, Oklahoma, South Dakota, Tennessee and Wyoming were
included in the announcement. The USDA uses the weekly U.S. Drought Monitor to
help decide which counties to deem disaster areas, which makes farmers and
ranchers eligible for federal aid, including low-interest emergency loans.
Nearly half of the nation's corn crop was rated poor to very poor,
according to the USDA's National Agricultural Statistics Service. About 37
percent of the U.S. soybean crop also rated in that category, while nearly
three-quarters of U.S. cattle acreage is in drought-affected areas, the survey
showed.
The impact on producers and consumers will become worse if the drought
continues into 2013, Brown said. “I don’t know what to think about what will
happen then to the domestic livestock industries,” he said.
Brown is a member of a team at MU that is launching a new program to help
increase the value of high-quality cattle and provide producers with economic
feedback about their cattle. This long-term opportunity will be essential to
help the cattle industry recover despite the lack of options many cattle
producers have today given the current drought. For more information go to www.quality-beef.com.
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