the united states beef cattle industry: production,...

The United States Beef Cattle Industry:

Production, Structure and Trends

Prepared by

Dr. James McGrann

Ranch Management Economist, Professor Emeritus, Texas A&M University

Purpose

To introduce the United States beef cattle industry. A description of the beef sector is presented, along with illustrative data tables. Data is also presented on the feed grain sector, as it is an important part of the beef production system.

Editor’s credit: Katie Leister, Aggie Development, Inc.: freelance writing for agribusiness, http://AggieDevelopment.com.

http://aggiedevelopment.com/

The United States Beef Cattle Industry – Production, Structure and Trends

Section 1. United States Agriculture Key Descriptive Measures United States Department of Agriculture 2007 Census Data The 2007 agriculture census reported there were 2,204,792 farms in the United States. However, the USDA definition of a farm makes this number misleading. To qualify as a farm in the census, “$1,000 or more of agriculture products were, or would be, produced and sold during the census year.”1 With this definition, most of the “farms” reported are resident/lifestyle or retirement farms. This classification makes up 57% of the total number of farms, but accounts for very little agricultural production. Less than six percent of farms, or 125,000 farms, accounted for 75% of the total U.S. agricultural output. The classifications of “large family farms” (family farms with sales between $250,000 and $500,000) and “very large family farms” (sales over $500,000) made up nine percent of U.S. farms, but accounted for 63% of agricultural products sold. 2007 Census Statistics:

The largest number of farms, nearly 800,000, was devoted to cattle and calf production.

53,722 of these farms, or 6.7 %, accounted for 75% of sales. Feedlots were included in this classification.

There are 69,763 dairy farms; 20% (14,417) of which account for 75% of sales.

There were 922 million acres in farms: 406 million in cropland 409 million in permanent pasture or rangeland

Of the 843 million acres in woodlands, 370 million were pastured. The population of the United States is approximately 306 million, making it the world’s third largest country, with tremendous purchasing power. The 2007 average per capita income was $38,615, and only 12% of the average household expenditures were for food; one of the lowest percentages in the world. In addition to agricultural production meeting food needs of this large population, the value of agricultural exports was $90 billion in 2007, with a favorable trade balance of $18 billion. In matters of trade, no consideration of international food production and trade can disregard the future market growth potential of China. With 1.3 billion residents, it holds 20% of the world population, with steadily increasing purchasing power. When combined with India’s 1.2 billion, these two countries alone have 37% of the world’s population. In this respect, aggressive by-lateral trade policy with China and India should be part of trade efforts for all countries. The United States can specialize in large production systems along the lines of competitive advantage due to the large consumer market, rich agricultural land resources, advanced education and production technologies, especially in crop production and management. The natural and human resource advantage is further complemented by an infrastructure that facilitates movement of feed, livestock and commodities to domestic and foreign markets.

1 Source: 2007 Census of Agriculture www.agcensus.usda.gov

http://www.agcensus.usda.gov/


U.S. Beef Cattle Inventories and Location Table 1.12 illustrates how the inventory of beef breeding cows increased over time, but has begun to decline. This trend is especially evident in recent years with higher feed costs, partly attributed to the competition with ethanol for use of corn.

However, the declines in beef breeding cow numbers have been offset by increases in beef production. Today, there are fewer non-fed cattle, but harvest weights have increased. Yet, the recent decline in beef cow numbers due to increasing production costs is significant enough to lower beef production due to fewer calves entering the market. Higher production in the feedlot sector is a product of more cattle and calves on feed, shown in Tables 1.2A and 1.2B3.

Table 1.2A Percent of Total Cattle and Calf Inventory on Feed4

2 Source: USDA – NASS, Agricultural Statistical Board

3 Source: USDA – National Agricultural Statistics Service, Agricultural Statistical Board

4 In 2005 and 2006, 85% of cattle marketed were from feedlots of 1000 head capacity or greater.

1950 1960 1970 1980 1990 2000 2009 2010

All Cows 40,595 45,871 48,780 47,866 42,470 42,758 41,005 40,456

Beef Cows 16,743 26,344 36,690 37,107 32,455 33,575 31,671 31,376

Dairy Cows 23,852 19,527 12,091 10,758 10,015 9,183 9,333 9,081

0

10,000

20,000

30,000

40,000

50,000

60,000

10

00

he

ad

Table 1.1 United States Cattle Inventory, 1950-2010

1950 1960 1970 1980 1990 2000 2008 20092010

*

% on Feed 5.8% 7.5% 11.8% 11.0% 12.1% 14.3% 14.6% 14.7% 14.6%

0.0%

4.0%

8.0%

12.0%

16.0%

*2010=Projection


The population of beef cows and cattle on feed centers around Texas and states to the north or center of the United States (Tables 1.3A and 1.3B).

Rank State (000) Head % of U.S. Total

1 Texas 5,140 16.4%

2 Oklahoma 2,073 6.6%

3 Missouri 1,968 6.3%

4 Nebraska 1,781 5.7%

5 South Dakota 1,618 5.2%

6 Kansas 1,434 4.6%

7 Montana 1,465 4.7%

8 Kentucky 1,070 3.4%

9 Tennessee 997 3.2%

10 Florida 958 3.1%

Top 10 Total U.S. Total

18,504 31,376

59.0%

Rank State (000) Head % of U.S. Total

1 Texas 2,680 24.3%

2 Nebraska 2,360 21.4%

3 Kansas 2,250 20.4%

4 Colorado 1,010 9.2%

5 Iowa 570 5.2%

6 California 465 4.2%

7 Oklahoma 365 3.3%

8 Arizona 288 2.6%

9 South Dakota 235 2.1%

10 Idaho 215 2.0%

Top 10 Total U.S. Total

10,438 11,009

94.8%

1950 1960 1970 1980 1990 2000 2008 2009

Lbs./Head 119 149 191 193 236 273 277 277

0

50

100

150

200

250

300

Lbs/

He

ad

Table 1.2B U.S. Beef Production of Cattle Inventory (Lbs/Head)

Table 1.3A Top 10 States in Beef Cow Inventory, January 1, 2010

Table 1.3B Top 10 States in Cattle on Feed Inventory, January 1, 2010


U.S. Feed Grain Industry Drives the Production System The high productivity of the beef industry is the result of a very large and industrious feed grain production sector. The most important crops grown in the United States are, in order of importance: corn, soybeans, wheat and sorghum. Table 1.4 shows historical crop prices for these feed grains.

Table 1.4 U.S. Feed Grains, Nominal and Real Prices5 ($/Bushel)

*Deflated by the consumers price index 2009=100

Year Sorghum Real Price Sorghum Barley

Real Price Barley Corn

Real Price Corn

1960 $0.84 $6.09 $1.00 $7.25

1970 $0.97 $5.41 $1.33 $7.39

1980 $2.79 $7.26 $3.11 $8.10

1990 $2.12 $3.48 $2.14 $3.51 $2.28 $3.74

2000 $1.89 $2.34 $2.11 $2.62 $1.85 $2.29

2001 $1.94 $2.34 $2.22 $2.67 $1.97 $2.37

2002 $2.32 $2.71 $2.72 $3.18 $2.32 $2.71

2003 $2.39 $2.74 $2.83 $3.24 $2.42 $2.77

2004 $1.79 $1.97 $2.48 $2.73 $2.06 $2.27

2005 $1.86 $1.95 $2.53 $2.65 $2.00 $2.10

2006 $3.29 $3.34 $2.85 $2.89 $3.04 $3.08

2007 $4.08 $4.01 $4.02 $3.95 $4.20 $4.12

2008 $3.20 $3.04 $5.37 $5.10 $4.06 $3.86

2009 $3.15 $3.15 $4.66 $4.66 $3.55 $3.55

Corn is the major feed used in beef production. Sorghum, barley and oats are all important feeds as well. Table 1.5 lists recent price and production data for these feeds. Most of these grains are fed in confinement, which explains the domination of the feedlot-based beef production systems.

5 Source: USDA – Economic Research Service, U.S. Bureau of Labor Statistics: http://data.bls.gov/

http://data.bls.gov/


Table 1.5 U.S. Feed Grain Production, Yields and Prices

The United States has a clear worldwide competitive advantage in producing corn-fed beef, which consumers have preferred over time. Imports of lower cost, lean, grass-produced beef complements fed-beef production, as it is mixed with trimmings to produce ground meat, which accounts for more than 55% of domestic beef consumption.


To understand the U.S. beef production system is to realize it centers on corn production. The grain-based, confined feeding production system is only applicable where low cost feed grains are available. Table 1.6 explains corn production in the U.S., including how it is utilized.

The fed-beef production system does face challenges: the use of corn for ethanol production and increased exports of corn used primarily for poultry and pork production, the most efficient users of feed grains.

Importance of U.S. Beef Research and Education The public-supported Land Grant University research, education and extension programs have historically developed technologies to support producers, as well as various USDA entities. Today, agribusiness company-led research and technical assistance efforts are increasing, and progress in bio-technology has been phenomenal. The contributions these efforts make toward competitiveness in world agriculture are often overlooked. Yet, one can guarantee the 125,000 farms that account for 75% of agricultural sales have teams of employees trained and supported by these public and private sector investments in human resources. In fact, agriculture around the world has benefited from these investments in research and education. Agricultural Subsidies American taxpayers sent $13.4 billion in farm subsidies to more than 1.4 million recipients in 20066. Corn producers and land owners received more subsidy payments than those of any other crop. Of course, corn is the most important domestic crop in most any measured dimension. It ranks third in value of receipts, below only beef cattle and dairy products.

6 Source: http://farm.ewg.org

Rank State/Usage Corn (000 Bu.)

% of Total

1 Iowa 2,188,800 18.1

2 Illinois 2,130,100 17.6

3 Nebraska 1,393,650 11.5

4 Minnesota 1,180,800 9.8

5 Indiana 873,600 7.2

6 South Dakota 585,200 4.8

7 Ohio 421,200 3.5

8 Kansas 486,420 4.0

9 Missouri 461,500 3.8

10 Wisconsin 394,560 3.3

Top 10 10,115,830 83.6

U.S. Total Production 12,101,238

USE

Feed 5,250,000 43.9

Food, Seed & Industrial 4,920,000 41.1

Exports 1,800,000 15.0

Table 1.6 U.S. Corn Production and Use, 2008

http://farm.ewg.org/


During the 12 year period of 1995 to 2006, corn producers and land owners were paid a total of $56 billion in subsidies, an average of $4.66 billion annually. The historical and political based price support (subsidy) program has greatly contributed to corn production levels. It is tax payer supported, and from their standpoint, an outdated program. As previously noted, today’s agricultural structure and limited number of operations hardly justifies agricultural subsidies. Government subsidies favoring ethanol production have been particularly disruptive to the corn market, and caused some painful adjustments in all livestock sectors. Needless to say, distortions caused by interference in market allocation of resources are seldom positive. All livestock and poultry producers have directly benefited from low corn prices as subsidies, providing incentives to adopt new production-increasing technologies. It is extremely difficult to quantify the impact of subsidies and other public-supported investments in agriculture. However, for a country where 9.5% of personal income is spent on food, and there is a positive export balance, it is equally difficult to assume they are all negative. Trends in the U.S. Beef Sectors There are several underlying trends influencing the current instability of the U.S. beef sector. These trends reflect real changes and dictate future direction within each industry. Technological changes in agriculture continue at a fast pace, particularly in crop production, as reflected in yield increases and rapid application of bio-technology. For example, corn yields are expected to double in the next ten years. This is important to the beef industry due to the significance of corn in all feeding systems. The alternative use of corn for ethanol, although a minor contributor to energy needs, places a new competitive demand on corn. Historically, the U.S. has had a favorable steer to corn price ratio, which is the major driver in feedlot production and marketing (Table 1.7).

Table 1.7 Historical Steer-Corn Price Ratio7

*Deflated by the consumers price index, 2009=100

This ratio is the most important indicator of feedlot profitability, as evidenced by recent negative impacts related to corn price volatility. The favorable steer to corn relationship has enabled the U.S. to maintain a world competitive advantage in fed beef production.

7 Source: U.S. Bureau of Labor Statistics, http://data.bls.gov/; Source: USDA-ERS and CattleFax, “Long Term Outlook” 2002 and

2010

Year Corn ($/Bu.)

Real Price Corn

Fed Steer ($/Cwt.)

Real Price Fed Steer

Ratio (Cwt./Bu.)

Ratio (Lb. to Lb.)

1980 $3.11 $8.10 $67.97 $176.94 21.9 12.24

1990 $2.28 $3.74 $78.32 $128.54 34.4 19.24

2000 $1.85 $2.29 $69.65 $86.36 37.6 21.08

2001 $1.97 $2.37 $72.29 $87.02 36.7 20.55

2002 $2.32 $2.71 $67.46 $78.94 29.1 16.28

2003 $2.42 $2.77 $83.72 $95.93 34.6 19.37

2004 $2.06 $2.27 $84.54 $93.04 41.0 22.98

2005 $2.00 $2.10 $87.75 $92.04 43.9 24.57

2006 $3.04 $3.08 $86.08 $87.26 28.3 15.86

2007 $4.20 $4.12 $92.73 $91.07 22.1 12.36

2008 $4.06 $3.86 $92.76 $88.18 22.8 12.79

2009 $3.55 $3.55 $84.50 $84.50 23.8 13.33

http://data.bls.gov/


Table 1.8 Corn International Trade—Exports8

The United States accounts for two-thirds of world corn exports (Table 1.8), with a growing demand as countries increase poultry and pork production. This results in a trend for corn cost to increase over time.

General Trends in U. S. Agriculture Trends are not necessarily reflected in the census data presented. Although there is

political rhetoric about saving the “family farm,” it is already history. As previously noted, only six percent of farms (125,000) account for 75% of production. The definition of what constitutes as a farm ($1,000 income potential) only serves the political agenda, and is not realistic in production. Subsidies will also diminish over time as the political power of the few fades.

The Department of Agriculture 2011 budget allocates 70% to various nutrition

programs. Approximately 15% of the population participates in these programs. Commodity program funding is only 10% of funding allocated to nutrition.

The economy of scale of the human resource is under appreciated when addressing

further concentration and specialization. The well-educated and information technology supported specialists drive effective management and industry productivity.

Domestic consumers demand low cost, safe food with variety, convenience and

consistency. In an economy this size, with its abundant consumer purchasing power, all producers must focus on consumers and their ever-changing preferences.

The phenomenal improvement of information and communications technology, with

access in rural areas, is changing the ability of producers to access information, buy inputs and sell products. These technologies have changed the marketplace for both buyers and sellers in all phases of production and marketing.

As mentioned, the U. S. has a long history of public-supported research and education in

agriculture through the Land Grant University system and various federally supported USDA organizations. However, this support is declining, and it is yet to be seen if the private sector can maintain the success previously experienced. Producers will certainly be paying through private firms for larger portions of research and development costs when they buy inputs such as seed, chemicals and animal genetics.

All U. S. beef producers face increased challenges beyond their business from people

and politics with little understanding of their business and resource management. The animal rights and welfare movement, environmental concerns, food safety issues, water availability, anti-technology questions, trade restrictions and preservation of property rights are issues beef producers must face. Producers should also actively support organizations which understand and maintain their interests.

8 Source: USDA-FAS, Agricultural Statistics 2008

Export Country Metric Tons (000) Percent

United States 62,233 66%

Argentina 16,000 17%

Brazil 8,500 9%

Other 7,610 8%

Total 94,343


Section 2. Beef Cattle Numbers and Trends The numbers and trends presented here describe the beef cattle industry—the largest sector in U.S. agriculture, which accounted for $49.9 billion in receipts (17% of total) in 20079. The beef sector has represented a mature industry in the past few years (2002 to 2009). Some segments are declining (cow-calf) with consumption competition from poultry. A series of shocks have also recently affected the sector: BSE caused trade disruption; increased corn prices associated with ethanol created cost shock; and the current economic recession has reduced demand, which will take time to recover. Beyond these realities, there are trends present which describe the sector, some of which are listed below.

Total beef production has been relatively stable, increasing in the feedlot sector as the beef cow herd has declined (Table 2.1).

The number and size of beef cow operations have shown decline, with 90% of

herds numbering less than 100 cows (Table 2.210). These small herds account for nearly 45% of total beef cows. Large herds make up less than one percent of total herds and account for 16% of the cow inventory. Agricultural property tax benefits and favorable treatment from federal income tax will maintain this size structure.

Table 2.2 Number of Beef Cattle Operations, Herd Size and Percent of Inventory by Size

Year

Beef Cow Operations

Average Herd (Hd)

1 - 49

50 - 59

1 - 99

100 - 499

>500

1995 897,660 39.3 79.8 11.8 91.6 7.8 0.6

2000 831,270 40.2 78.8 12 90.8 8.5 0.7

2005 770,170 42.5 77.5 12.3 89.8 9.5 0.7

2007 766,350 42.3 79.1 11.2 90.3 8.9 0.8

1995 897,660 39.3 31.2 19.2 50.4 35.3 14.3

2000 831,270 40.2 29.5 19.1 48.6 36.7 14.7

2005 770,170 42.5 28.0 18.9 46.9 38.5 14.6

2007 766,350 42.3 28.7 17.2 45.9 38.0 16.1

9 Source: USDA – Economic Research Service

10 Source: USDA – National Agricultural Statistics Service

Percent of Operations by Herd Size (Head)

Percent of Inventory by Herd Size (Head)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Cow -Mill.Hd. 33.6 33.4 33.1 33.0 32.9 32.9 33.0 32.9 32.4 31.7 31.38

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5

34.0

Mill

ion

He

ad

Table 2.1 Decline in U.S. Beef Cow Numbers

Percent of Operations by Herd Size (Head)

Percent of Inventory by Herd Size (Head)


All cow-calf producers with herds of more than 250 head have the option of retaining ownership through other phases of the production process to finish cattle. This is a high risk activity, and must be supported with detailed evaluation and use of risk management tools, including prudent use of the grain and cattle futures market11.

The total U.S. feedlot capacity is estimated to be 16.7 million head. In July 2009,

the estimated utilization was only 58%; down from 67% the preceding January12. This excess capacity is expected to lead to further concentration in the cattle feeding sector.

The longer view (1995 to 2008) and projections of production (Tables 2.3 and 2.413) show the pounds of beef produced per head of inventory have increased, as more cattle are fed to heavier weights. Reproduction rates, and in turn the total inventory extraction rates, have not changed over time. Genetic changes have focused on beef carcass quality and product consistency; not on reproductive efficiency of the beef cattle herd.

Table 2.3 Cattle Inventory and Harvest, Beef Production and Consumption

Year

Cattle Inventory (Mil.Hd.)

Cattle Harvest

(Mil. Hd.)

Beef Production

(Bil. Lbs.) Consumption

(Lbs.)14

Fed Steer Price

($/Cwt.)

1995 102.8 34.2 24.2 66.3 $66.57

1996 103.5 35.6 25.1 66.6 $65.00

1997 101.7 36.6 25.4 67.2 $66.09

1998 99.7 35.5 25.7 66.7 $61.73

1999 99.1 36.1 26.4 67.5 $65.65

2000 98.2 36.2 26.8 67.6 $69.65

2001 97.3 35.4 26.1 66.2 $72.29

2002 96.7 35.7 27.1 67.9 $67.46

2003 96.1 35.5 26.2 64.4 $83.72 2004 94.9 32.7 24.5 66.1 $84.54 2005 95.4 32.4 24.7 65.4 $87.75 2006 96.3 33.7 26.2 65.8 $86.08 2007 96.6 34.2 26.4 65.2 $92.73 2008 96.0 34.4 26.6 62.8 $92.76 2009 94.5 33.2 26.2 61.5 $84.50 2010

15 93.1 32.0 25.2 59.4 $88.00

2011 92.9 31.4 25.2 58.3 2012 93.2 31.7 25.7 58.0

11

Section 3 addresses the use of tools for evaluation of retained ownership. 12

Source: CattleNetwork.com 13

Source: CattleFax 14

Consumption figures on per capita basis 15

2010-2012 data based on CattleFax projections


Table 2.4 Cattle Inventory, Harvest and Extraction Rate, Beef Production

Year

Cattle Inventory (Mil.Hd.)

Cattle Harvest

(Mil. Hd.)

Extraction Rate

(% of Inv.)

Beef Production

(Bil. Lbs.)

Beef Production

(Lbs/Hd/Inv)

1995 102.8 34.2 33.3 24.3 236

1996 103.5 35.6 34.4 25.1 243

1997 101.7 36.6 36.0 25.4 250

1998 99.7 35.5 35.6 25.7 258

1999 99.1 36.1 36.4 26.4 266

2000 98.2 36.2 36.9 26.8 273

2001 97.3 35.4 36.4 26.1 268

2002 96.7 35.7 36.9 27.1 280

2003 96.1 35.5 36.9 26.2 273

2004 94.9 32.7 34.5 24.5 258

2005 95.4 32.4 34.0 24.7 259

2006 96.3 33.7 35.0 26.2 272

2007 96.6 34.2 35.4 26.4 273

2008 96.0 34.4 35.8 26.6 277

2009 94.5 33.2 35.1 26.2 277

201016

93.1 32.0 34.4 25.2 271

2011 92.9 31.4 33.8 25.2 271

2012 93.2 31.7 34.0 25.7 276

U.S. beef exports are primarily corn-fed beef to Japan, Mexico, South Korea and

Canada (Tables 2.5 and 2.6). These countries alone account for 90% of beef exports.

Table. 2.5 Top Markets for U.S. Beef17

Year Volume

(Mil. Lbs.) Value ($Mil)

Volume (Mil. Lbs.)

Value ($Mil)

Volume (Mil. Lbs.)

Value ($Mil)

Volume (Mil. Lbs.)

Value ($Mil)

2002 771 854 629 615 597 619 241 286

2003 918 1182 586 623 587 754 227 309

2004 12 31 333 393 1 2 56 105

2005 17 50 464 584 1 3 106 194

2006 52 105 660 786 1 4 239 415

2007 159 294 586 732 78 124 339 575

2008 231 439 649 854 152 241 389 683

2009 275 496 563 690 141 215 362 621

16

2010-2012 data based on CattleFax projections 17

Source: USDA – ERS, www.ers.usda.gov/News

Japan Mexico South Korea Canada


Table 2.6 U.S. Beef Imports and Exports, 2002-200918

Lbs.)

These markets demand consistent, high-quality fed beef for their respective domestic hotel and restaurant industries, and increasingly in retail consumer markets where trade permits.

Trade restrictions have limited the growth of beef exports. Tables 2.7 and 2.819

illustrate beef export statistics.

18

Source: USDA, Jones, Keithly and Mathes, Shane, "Factors Shaping Expanding U.S. Red Meat Trade," LDP-M-175-01,

www.ers.usda.gov 19

Source: USDA – ERS, www.ers.usda.gov/News

2002 2003 2004 2005 2006 2007 2008 2009

Billion Lbs. 2.447 2.581 0.460 0.697 1.144 1.433 1.887 1.868

0

0.5

1

1.5

2

2.5

3

Bill

ion

Lb

s.

Table 2.7 U.S. Beef Exports, 2002-2009

2002 2003 2004 2005 2006 2007 2008 2009

% of Production 9.0 9.6 1.9 2.8 4.4 5.4 7.1 7.2

0.0

2.0

4.0

6.0

8.0

10.0

12.0

% o

f To

tal P

rod

uct

ion

Table 2.8 U.S. Beef Exports as Percent of Production, 2002-2009

Year Imports Exports Difference % Difference

2002 3,217,599 2,447,704 (769,895) -23.9

2003 3,005,910 2,518,249 (487,661) -16.2 2004 3,679,232 460,314 (3,218,918) -87.5 2005 3,598,509 697,158 (2,901,351) -80.6

2006 3,084,795 1,144,395 (1,940,400) -62.9 2007 3,051,720 1,453,095 (1,598,625) -52.4

2008 2,537,955 1,887,480 (650,475) -25.6

2009 2,628,360 1,868,000 (760,360) -28.9

http://www.ers.usda.gov/


Imports from Australia, Canada and New Zealand account for 70% of beef imports (Table 2.9 and 2.1020). Their lean beef complements trimmings from corn fed beef to make ground meat, which accounts for more than 50% of U.S. beef consumption.

More than two million live feeder cattle are imported annually from Canada and Mexico, and finished in U. S. feedlots (Table 2.11). Some of the finished beef is then exported to these same countries.

Table 2.11 U.S. Live Cattle Imports, 2002-2008

20

Source: USDA, Jones, Keithly and Mathes, Shane, "Factors Shaping Expanding U.S. Red Meat Trade," LDP-M-175-01,

www.ers.usda.gov

2002 2003 2004 2005 2006 2007 2008

Canada 1,686,5 512,353 135 559,134 1,031,8 1,404,8 1,581,3

Mexico 816,460 1,239,5 1,370,4 1,256,4 1,256,9 1,090,0 702,661

Total2,502,9 1,751,8 1,370,6 1,815,5 2,288,8 2,494,9 2,283,9

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

He

adCountry 2007

Mil. Lbs. 2008

Mil. Lbs. 2009

Mil. Lbs.

Australia 887.7 663.0 992.0 Canada 789.5 841.2 812.3 New Zealand 507.7 527.3 517.4 Total, Top Three 2,185 2,032 2,322 Percent of Total 72% 67% 76%

Rest of World 867 1,021 731 Total 3,052 3,052 3,052

Beef Imports Million Lbs. Percent

Total Imports 2,626.5

Australia 720.0 27.4

Canada 812.3 30.9

New Zealand 517.4 19.7

Uruguay 76.2 2.9

Brazil 76.2 2.9

Nicaragua 89.0 3.4

Share of Total 87

Table 2.9 2009 U.S. Beef Imports (87% from six countries)

Table 2.10 U.S. Beef Imports, 2007-2009, Percent by Country

(67 to 76% from three countries)

http://www.ers.usda.gov/


Per capita beef consumption has not kept pace with the rise in poultry. In 2000, poultry surpassed beef consumption (Tables 2.12 and 2.13). Beef will no doubt continue to receive competitive pressure from poultry and pork, which have higher feed conversion rates.

Table 2.12 Per Capita Beef and Veal Availability Versus Poultry

Table 2.13 Total Red Meat and Poultry Availability

1950 1960 1970 1980 1990 2000 2007 2008 2009

Beef & Veal 73 92 117 105 97 97 94 90 83

Poultry 25 34 48 59 88 107 117 116 111

0

20

40

60

80

100

120

140

Lbs.

1950 1960 1970 1980 1990 2000 2007 2008 2009

Red Meat 147 174 193 180 162 164 160 156 149

Poultry 25 34 48 59 88 107 117 116 111

Total 172 209 241 239 250 271 276 272 260

0

50

100

150

200

250

300

Lbs.


Increased concentration, specialization and capturing economies of scale are trends in the beef sector (Tables 2.14, 2.15 and 2.16). These trends will only increase with adjustments from the 2007 to 2009 recession, along with competition with ethanol for feed, and poultry for sales. The seedstock sector, which primarily markets bulls to the commercial cow-calf sector, is relatively small in terms of number of operations and cattle inventory. Of nearly 800,000 cow-calf operations, just seven percent (53,772 operations) account for 74% of product sales. Concentration progresses at each level of the industry, as the top 25% of feedlot companies control nearly half the total feedlot capacity, and 75% of sales.

Table 2.15 Structure and Components of the Beef Industry

Tyson Foods27%

Cargill22%JBS-Swift -

Smithfield16%

National Beef10%

American Foods

5%

Greater Omaha

2%

Others18%

Table 2.14 Daily Slaughter Capacity of Major Beef Packers(65% of daily operations by top three packers)


Table 2.16 Top 25 Cattle Feeders with Capacity, 2009

Rank Operation Capacity No. Yards

1 JBS Five Rivers Cattle Feeding 810,000 10

2 Cactus Feeders 520,000 10

3 Cargill Cattle Feeders 350,000 5

4 Friona Industries 275,000 4

5 AzTX Feeders 242,000 5

6 J.R. Simplot 230,000 2

7 Irsik & Doll 215,000 6.5

8 Cattle Empire 197,500 4

9 Four States Feedyard 192,000 8

10 Agri Beef Co. 180,000 6

11 Pinal Feeding Co. 180,000 3

12 Heritage Feeders 171,000 4

13 Hitch 160,000 3

14 Opplinger 144,000 4

15 Dinklage 138,000 5

16 Barrett-Crofoot 135,000 3

17 Harris Feeding Co. 135,000 2

18 Gottsch 130,000 3

19 McElhaney 130,000 1

20 Innovative Livestock 125,000 7

21 Bar G Feedyard 125,000 2

22 Pratt Feeders 115,000 4

23 Cattleco 100,000 2

24 Barlett Cattle Co. 100,000 2

25 Adams Land & Cattle 93,000 1

Total 5,192,500 107

Corn production and the steer to corn price ratio will continue to explain the

economics of beef production in the U.S. The producer’s share of the retail value of choice beef from 2004 to 2008 ranged

between 47.2 and 45.2%, with an average of 46.6%. Average retail price for choice beef was $4.12 per pound; the net farm value at retail was $1.92. The live choice steer price was $0.89 per pound. Live choice fed steers will yield roughly 63% in carcass weight.

No single firm, whether a cow-calf producer, feedlot or packer, has the power to control or fight the marketplace. All segments must focus on consumer demands to maintain their share of the total protein demand.


Increases in beef production and efficiency have derived from the feedlot sector. Reproductive performance in the cow-calf sector has not seen vast improvements. A shift to the Angus breed has been the dominant producer trend, driven by genetics to better meet the consumer preference for marbled, corn-fed beef.

The U.S. will continue to have a competitive advantage domestically and internationally in producing corn-fed beef. This competitive position is permitted by domestic corn production. Since feedlot beef is the dominant product, there will continue to be a major import market for lean beef to combine with trimmings. Along with the current downsizing of the beef cattle industry, there will be more concentration in production and marketing, as reflected in Tables 2.14 and 2.15 above.

Contraction of the cow-calf sector and shift of land use for crops and recreation will prevent the cow herd from returning to historical levels. Sustained beef production levels with a smaller cow herd will eventually be restricted by corn production.

One threat to the beef industry previously mentioned is the animal rights movement. Dr. Dan Thomson of Kansas State University says there is a difference between animal welfare and animal rights. He also notes those who believe in animal rights will likely not be influenced by science. Along these lines, a 2007 study showed 97.4% of Americans eat beef, despite the well-funded efforts to discourage meat consumption21.

The American media often identifies with niche markets and minority production activities. The natural beef movement accounts for three to five percent of domestic beef sales, and the organic market is much smaller22. These alternative markets have low volume, high cost production, demanding high consumer prices to be financially sustainable. Producers who cannot compete in commodity markets will not find profitable opportunities in these niche markets, which will remain minor players in U.S. beef production.

Cattle age and source verification in the U.S. is currently market driven. There appears to be an adequate supply of beef from cattle in compliance. However, market premiums for these cattle are limited. Compliance with export demands will be a driving force behind required verification. Age and source verification is not cost prohibitive for cow-calf producers, as it costs $2 to $5 per head, or less than one-half to one percent of a weaned calf’s value.

21 Source: Western Livestock Journal, August 24, 2009 22 Source: Western Livestock Journal, Commercial Cattle Issue, Page 16, August 24, 2009


Beef cattle production performance differs a great deal between operations and regions. Table 2.17 illustrates benchmark data for cattle performance values in the U.S. The figures presented provide a rough estimate of the ranges of performance values. Values tend to be higher in the Northern temperate climate, while the heat in the deep South limits reproduction rates. Confinement performance varies more by cattle age, quality and breed, as most all are using corn based rations.

Table 2.17 Beef Cattle Benchmark Performance Data Ranges


Interdependence between Production and Marketing Segments Figure 2.18 illustrates the different levels of beef cattle production and marketing. Cow-calf producers with approximately 150 to 200 cows who can fill a truckload of cattle (approximately 100 calves) have the option of retaining ownership through all phases of production and marketing. Smaller producers market cattle through local auction markets. Retaining ownership is a margin business and requires more marketing and price risk management skills than selling weaned calves. From the feedlot sector, cattle are sold directly to packers/processors. Packers then sell finished beef products to the retail sector. Retail products reach the end consumer through various avenues: household consumption of grocery purchases, dining at independent or chain restaurants, and at institutions such as schools or hospitals. There is a great deal of concentration at the packer level. A similar concentration exists at the retail level, reflected in urban area supermarkets. Wal-Mart is the largest beef retailer, and chains like McDonalds sell a tremendous amount of beef as hamburgers. Specialization is again a product of economies of scale and very large consumer markets.

Figure 2.18 Beef Cattle Production and Marketing Levels


Appendix 1. List of Tables and Figures Table 1.1 United States Cattle Inventory, 1950-2010 Table 1.2A Percent of Total Cattle and Calf Inventory on Feed Table 1.2B U.S. Beef Production of Cattle Inventory Table 1.3A Top 10 States in Beef Cow Inventory, January 1, 2010 Table 1.3B Top 10 States in Cattle on Feed Inventory, January 1, 2010 Table 1.4 U.S. Feed Grains, Nominal and Real Prices Table 1.5 U.S. Feed Grain Production, Yields and Prices Table 1.6 U.S. Corn Production and Use, 2008 Table 1.7 Historical Steer-Corn Price Ratio Table 1.8 Corn International Trade – Exports Table 2.1 Decline is U.S. Beef Cow Numbers Table 2.2 Number of Beef Cattle Operations, Herd Size and Percent of Inventory by Size Table 2.3 Cattle Inventory and Harvest, Beef Production and Consumption Table 2.4 Cattle Inventory, Harvest and Extraction Rate, Beef Production Table 2.5 Top Markets for U.S. Beef Table 2.6 U.S. Beef Imports and Exports, 2002-2009 Table 2.7 U.S. Beef Exports, 2002-2009 Table 2.8 U.S. Beef Exports as a Percent of Production, 2002-2009 Table 2.9 2009 U.S. Beef Imports Table 2.10 U.S. Beef Imports, 2007-2009, Percent by Country Table 2.11 U.S. Live Cattle Imports, 2002-2008 Table 2.12 Per Capita Beef and Veal Availability Versus Poultry Table 2.13 Total Red Meat and Poultry Availability Table 2.14 Concentration in the Beef Packer Sector Table 2.15 Structure and Components of the Beef Industry Table 2.16 Top 25 Feeders Table 2.17 Beef Cattle Benchmark Performance Data Ranges Figure 2.18 Beef Cattle Production and Marketing Levels

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