With over 26 percent of the U.S. beef herd coming from areas that were in severe or exceptional drought areas, pasture range conditions, feeder cows and heifer retention will be delayed due to this year’s conditions.

Speaking before the conference Aug. 1 in the midst of the state’s worst drought in generations, Stuart said the herd contraction seen before 2012 was made more intense by the sell-off of cattle and calves in Texas, Oklahoma and parts of Kansas.

A key gauge, he said, was the percentage of cattle placed on feed that are heifers.

“We can see when people are rebuilding the national herd, and the volume of heifers going into the feedlot today indicates that we’re still in a contraction stage.

Yet beef demand is still setting records both in price and export volume to certain regions. And world beef production, Stuart showed, is in its fourth consecutive year of decline – just under 125 billion pounds, according to the USDA.

So the question for producers is how long it takes before beef production ramps up to meet demand.

“Say we keep those heifers back in 2012,” Stuart said. “Even in a best case scenario, we’re not going to see additional beef on the table, per capita beef, until 2015. That’s assuming we expand next year, which we may or may not.”

Stuart pointed to specific risks that could hurt beef products in the time it takes supply to increase. One “unsettling” trend, he said, can be found in per capita meat consumption in the U.S.

“Consumers aren’t eating as much meat,” Stuart said. “In a year or two of decline, that may be a supply issue. When you have five years of decline, I think it’s a demand issue.”

Consumer trends may be shifting, Stuart explained, with the rise of meatless Mondays on the East Coast, and less emphasis on proteins in some school lunch cafeterias, and the criticism waged against modern beef production methods.

In other corners of the globe, the challenge for producers isn’t information and marketing, but rather inflation. The price of food is rising significantly in 2012, as much as 50 percent on some international food index averages. “When food prices go up 50 percent, go to Dominican Republic or Haiti or the Caribbean Basin – they can’t afford it. This is very real outside the U.S.”

But retail trends aren’t helping U.S. production either, especially with beef prices averaging 2.5 times more than chicken. “If I walk 10 feet down the meat aisle, I can buy 10 pounds of chicken leg quarters for the same price I paid for one steak.”

Stuart warned producers to be cautious in how agricultural commodities will be an attractive option for stock traders, especially as global economies, currencies and stocks continue to struggle.

“Commodities are very sexy to investors right now. They love gold, silver, soybeans, corn, cattle – you name it. There’s a lot of money in the investment class that loves to play in our futures now.”

Those investments can be beneficial to the beef industry when hundreds of millions of dollars spill into cattle futures. But the investment trade can be fickle, so cattlemen should expect turns in the market.

“If you’re using cattle futures to manage your risk, you’ve to to be careful how the winds are blowing in Chicago.”

The outlook, however, remains strong for beef production to capitalize on prices and demand if ranchers can ride through the weather and feed-price obstacles of 2012.

“Incomes are rising a lot of regions are going from rice and beans diet to more protein,” he said. “We’re going to need to increase food production by 2050 by 70 percent.”

STAFF PHOTO

Brett Stuart of Cattle Fax presented recent market data at the Texas A&M Beef Cattle Short Course.