Beef prices set records in 2014 due to short supplies and rising demand in the U.S. and overseas, encouraging cattle producers to chase profits by expanding their herds. Now, despite declining prices for corn, they’re cutting back because slaughter cattle prices this year are forecast by USDA to be an average 18 percent lower than last year.
“It’s been a wreck,” South Dakota feedlot operator Herman Schumacher told Reuters. “I would anticipate that they (ranchers) are going to cut their herds again because of the financial situation.” If ranchers cut herd size, a wave of cattle will be sent to feedlots, boosting demand for corn until late in 2017 when the flow of feeder cattle will slow down. Corn, used heavily in fattening cattle to slaughter weight, is expected to sell at the lowest season-average price in a decade in the year ahead.
“Thousands of ranchers all over Montana are scrambling to save their livelihoods” in the collapse of fat cattle prices, says the Billings Gazette. “Ranchers were getting between $2.50 to $2.75 per pound as recently as a year and a half ago, but those same animals are now fetching between $1.10 and $1.30 per pound.” When a steer weighs 750 pounds or so, the drop in value is $1,000 a head.
Bill Bullard of the activist group Ranchers-Cattlemen Action Legal Fund blames the “marketplace control enjoyed by the four largest meatpackers” as a “major contributor to the ongoing decline.” An associate professor at Montana State University says cattle prices are simply coming back to earth after a period of uncharacteristic highs.