'It might be time to stock up on beef'
Brian Bowne watched carefully, with a cell phone pressed tightly against his ear, as cattle barreled through the gates of the auction ring during a sale this month at Mitchell Livestock Auction.
Lingering effects of the drought that devastated the Great Plains in recent years have shrunk the size of the cattle herd in South Dakota and the United States.
"Consequently, we've been short and the market is going higher on hamburger-style livestock," said Bowne, a cattle buyer for Green Bay, Wis.-based American Foods Group. "We're just trying to cover our needs right now."
The cattle shortage has caused a slow but steady rise in cattle prices, which will likely mean higher beef prices for consumers.
The number of cattle in South Dakota totaled 3.65 million as of Jan. 1, down 5 percent from Jan. 1, 2013, according to the U.S. Department of Agriculture's National Agricultural Statistics Service. That follows a national trend as the number of cattle in the U.S., the world's largest beef producer, fell 2 percent in that same time, down to 87.7 million. That's the smallest total since 1951, when the nation's herd totaled 82.1 million.
"It's had a positive effect on price," Bowne said, "but I don't know about the bottom line of some of the producers."
Jack Davis, an economist at South Dakota State University Extension's Mitchell Regional Center, said a recovery has begun, but it's going to take years to rebuild the herd.
"It is going to be a slow process because we're starting from such a low number," Davis said. "There is a lot of competition for the calves that are out there."
The number of calves born in South Dakota in 2013 totaled 1.69 million, down 1 percent from 2012, according to the USDA. Nationally, the calf crop totaled 33.9 million, also a 1 percent decline. That's the fewest calves born in the U.S. since 33.7 million in 1949.
A blizzard that swept through western South Dakota in early October and killed an estimated 43,000 head of livestock shouldn't have a long-term impact on the cattle markets, Davis said.
"The blizzard was really a one-time event," he said. "All it really does is it takes that number out of our local auction barns."
A harsh winter across much of the U.S. has limited cattle growth and, in many cases, has also limited the distance producers are willing to travel to sell their livestock, Bowne said.
Don Stange, owner of Mitchell Livestock Auction, said that problem hasn't been as visible here, as Mitchell Livestock Auction has still attracted sellers from as far away as Nebraska and Iowa. With fewer cattle to go around, the auction has been drawing from an even larger geographic area than normal.
"We just have a good market here," Stange said. "There are a lot of good buyers."
As of Feb. 1, the average price for feeder steers bought at auction in South Dakota was between 8 and 25 percent higher than last year, depending on weight, according to USDA reports. The average price for feeder heifers was up between 18 and 25 percent in that same time.
If consumers continue to buy beef, that demand paired with the short supply of cattle will most likely mean prices for those commodities will stay at their current highs or even increase, Davis said.
"It might be time to stock up on beef," he said.
The USDA reports the price of all fresh retail beef was $5.04 per pound in December, up more than 5 percent from $4.80 per pound in December 2012.
"If consumers don't balk at that, everybody in the industry should be able to make some money this year," Davis said.