He added that drought and soaring feed costs are not only restricting American beef export growth but are also limiting the North American beef industry’s ability to service its own domestic needs.

Therefore, Australian lean beef exports to America were set to enjoy big demand, particularly if U.S. seasonal weather conditions make a real recovery and local cow slaughter rates shrink back.

If drought-breaking rain does arrive across the major U.S. cattle states, ranchers would hold cattle on-farm – particularly heifers – but if good rain doesn’t eventuate, more cattle would be off-loaded into the slaughter market.

Close added that supplies of available stock from Mexico were also drying up because increased U.S. demand for Mexican feeder cattle has eaten into the breeding herd south of the border in the past year.

“There will be a shortage in U.S. beef supply going into 2014,” Close said. “We’ve painted ourselves into a tight corner.”

Importantly, he said grass-fed beef from Australia could fill U.S. grinding market needs at a time when top-end Australian exports to the much-disrupted Indonesian market require alternative buyers to absorb northern Australian output.

Although a powerful export market player, U.S. beef exports only represented about 11 percent of global beef production.

Close said it is becoming increasingly awkward for the U.S. to fully capitalize on those attractive emerging overseas markets.

He added that Australia’s recent gains in China provided a good indicator of the exciting opportunities available for all beef exporters.

“But while we’re very interested in staying in the export trade, we are going to have a big issue feeding the U.S. in the future,” he said.

A fast-rising U.S. population and strong competition for U.S. grain – notably from the government-supported ethanol industry – would probably see domestic beef consumption continue taking almost 90 percent of the nation’s beef output.

“Corn prices have doubled in the past six years, hay prices have been particularly high in the drought, too, and fuel and electricity costs are typical of other expensive inputs that are discouraging (feedlot) producers,” Close said.

While production efficiencies continue improving to deliver more meat from a smaller herd and labor base, maintaining those efficiency gains across the beef supply chain will be more difficult for U.S. producers.

However, he said it’s likely the U.S. obsession with turning grain crops into ethanol will subside by the time the U.S. presidency changes in three years, potentially giving lot feeders a big boost from cheaper feed and energy inputs.

Argentina
Argentina’s cattle herd has grown to 51 million head and should keep recovering from a devastating 2009 drought that, along with price controls, forced ranchers to slaughter millions of animals before their time.

Between 2007 and 2010, 17 percent of Argentina’s cattle herd was slaughtered or perished.

That three-year period was marked by government price controls that discouraged beef production and hot weather that peaked in 2009, turning prime grazing land into dust.

By the end of that three-year period, only 48 million head of cattle were left and soy farming was fast encroaching on Argentina’s iconic grazing lands. The government lifted beef price controls in 2010.

“Starting in 2010, thanks to higher prices, ranchers started conserving more of their cows to be used for reproduction,” says ranching consultant Victor Tonelli.

“The inertia of the three preceding years means stocks should keep growing.” Between 2010 and 2013 the Argentine herd gained from three to 3.3 million head, and it could gain another 2.7 million to reach a total of 54 million by 2016, Tonelli says.

Cattle market analyst Ignacio Iriarte says that of the 10 million head of cattle that were lost between 2007 and 2011, 3.5 to four million have been recuperated.

He says the size of the herd should stabilize soon as the retention of cows used for reproduction has been dropping in recent months, reflecting a dip in beef prices.

In the first two months of this year 42.5 percent of the country’s total cattle slaughter was of cows, versus 39.3 percent in the same 2012 period.

For herd size to remain steady, Ciccra says, slaughter of cows as opposed to bulls must not rise above 43 percent.

Some, however, have a more cautious view of the herd’s growth prospects over the years ahead.

“Yes, there was a restructuring of the sector in recent years, but today you will find that between 25 and 30 percent of the national herd is two years older than it should ideally be,” says Gervasio Saenz Valiente, an analyst with the Saenz Valiente, Bullrich and Co. consultancy.

Brazil
Brazilian beef production is forecast to reach 9.5 million metric tons (MT) in 2013, driven by government support for herd expansion, genetic improvements, sustained cattle prices and strong international demand.

Brazilian beef exports have been revised upwards, forecast to reach 1.6 million MT – largely driven by increased opportunities for shipments to Russia.

Although Brazil is the world’s top beef exporter, it actually consumes 80 percent of the beef it produces domestically.

Meatpackers Marfrig and JBS, the world’s top beef producer, have said they expect an increase in the number of cattle available for slaughter in the second quarter of 2013, as the traditional rainy season ends in Brazil.

Renato Costa, chief executive of JBS, says he expects the number of cattle moved off of pastures and onto feedlots in Brazil to grow by 10 percent this year, driven by lower feed costs.

Brazil, which is famed for its grass-fed beef, is confining more animals to feedlots and converting degraded pastures into soybean fields.

The country is expected to harvest record soy and corn crops this season, lowering global and domestic prices of those commodities, which are used to make animal feed. 

Clint Peck is former director of Montana’s Beef Quality Assurance program. Portions of this column were taken from articles in Meat Trade News Daily.