Harsh weather sends beef prices upward

2014-04-11T15:00:00Z Harsh weather sends beef prices upwardWaterloo Courier La Crosse Tribune
April 11, 2014 3:00 pm  • 

JESUP, Iowa — Wesley Thoma may be young, but he knows all about timing.

Four years ago, when he was only 15, he started his cattle operation with 10 head. Beef supplies nationwide were ample.

It was a good time to get into the business.

Then, drought conditions hit and cut into the cattle population.

Prices started heading upward.

Now, Thoma is running a 140-head operation near Jesup, and beef prices are reaching record levels.

He acknowledges his timing was good, but he says he’s realistic.

“It’s all right,” he said. “I know there will be good times and bad times. It ain’t always going to be great, but it’s been pretty good as long as I’ve been in it.”

The hard work of a cattle operation, combined with a spate of capricious weather, has chased some producers into more stable commodities like corn and soybean, Thoma said.

After years of extreme weather, the U.S. cattle herd has shrank for six straight years to the smallest level since 1952, the U.S. Department of Agriculture reported in January.

A record drought in 2011 decimated pastures in Texas, the top beef-producing state, followed the next year by a surge in feed-grain prices.

Fewer cattle means production in the $85 billion beef industry will drop to a 20-year low in 2014, the USDA said.

“It’s very much a supply-and-demand kind of issue,” said Denise Schwab, Iowa State University Extension beef program specialist for Northeast Iowa.

"Demand has held steady from a domestic standpoint and import demand has risen slightly. What we’re seeing though is supply side is very short,” she said.

Drought has been a major factor.

“We just haven’t had enough feed to maintain the cow herd nationally,” she said.

Iowa producers have been more fortunate than colleagues in the South and West, where grasslands have withered, Schwab said.

According to USDA, prices for meat increased 1.7 percent from January to February and 3.6 percent since February 2013. For beef and veal, which are at or near record prices around the country, the price index increased 4 percent from January to February this year and 5.4 percent from February 2013 to February 2014.

Prices paid to cattle producers increased 1.1 percent from January to February and 14.9 percent since this time last year. USDA is projecting an 8 to 9 percent increase in prices paid to cattle producers in 2014.

The price index for wholesale beef producers increased 2.4 percent from January to February and 7 percent since February 2013. USDA is projecting a 4 to 5 percent increase in price index for wholesale beef in 2014.

That translates to an average of $4.48 per pound for fresh beef products at retail and $5.60 for USDA choice-grade beef in February, according to USDA. Two years ago, the price averages were $4.41 for all products and $5.51 for USDA Choice.

Jim Thoma, Wesley’s uncle, runs a 1,200-head operation near Jesup. The elder Thoma said prices likely will remain higher for years.

“I guess it’s gonna take a year or two, at least, to start getting more cattle,” he said.

In the meantime, it’s a good time for those producers who remain in the business.

“I think prices are going to stay pretty fair to the livestock producer for the next five years, and then it will turn to the grain farmers,” Wesley Thoma said. “It flips every five years.”

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