Drought, Heat, and The Price of Meat

In case you've not heard, the U. S. is having a dry (and, yeah, HOT) summer. Drought is one of the biggies when it comes to food prices. Grains are one obvious reason: lack of rain will harm wheat crops, for example, and so wheat will be in short supply, and the price of Wheaties will go up. Drought also affects meat prices. Why? Because cattle and hog producers rely on grasses and grain to feed their stock. (And please: let's not digress into yet another discussion about the wisdom of feedlots, okay?)

In the very short term, beef prices will drop. But over the long haul those prices will go up, up, up. To understand why, it helps to know something about livestock production.

Out in the far west (think Utah, Colorado, Wyoming), ranchers graze cattle on grasses. Those grasses are sturdy (they've evolved for an arid climate), but even they can suffer in severe drought.

When the grasses are in short supply, ranchers cull their herds: They'll sell off steers AND  cows that would otherwise produce more cattle. Why? Because they can't get enough feed for them.

BUT: even if there was plenty of rain in, say, Wyoming, those ranchers would start selling off their herds anyway. Why? Because they know they won't find buyers for them. Here's why.

Those ranchers sell their grass-fed cattle to farmers who "finish" them for market by feeding them a mixture of non-grass foods, especially corn and soybeans.  But if drought in, say, Iowa or Missouri, damages fields of corn and soybeans, the prices of those crops will soar (which is what's happening now).

So Iowa farmers who would ordinarily stock up on corn and soybeans as feed won't be buying it. It'll cost too much. And because they can't afford those feedstuffs, they also won't buy cattle from western ranchers.

Both groups of livestock producers know this. So what they'll do now is sell off their cattle as fast as they can. In the short term, the market will be glutted with cattle. Packers will have their pick of cattle,which means low prices for them and for consumers. In the SHORT TERM.

But over the next six or so years, beef prices will move up. Why? Because once ranchers/farmers cull their herds, the only way to rebuild those herds is with time -- it takes about seven years to rebuild a herd. Ain't no way to speed up the process of raising new cows who can then give birth to more cattle.

Pork prices will go up, too, because hogs eat corn. No corn equals high prices for feed equals not many hogs. But hogs don't take as long to reproduce, so the cycle for pork prices doesn't take as long to stabilize (plus hogs can and do have litters more than once a year).

So in the short run, expect bargain prices for beef, followed by higher prices over the long haul, and higher prices for damn near everything else that goes in the stomach (including things like beer, wine, and whiskey, all of which are agricultural products that are also affected by drought).

So, assuming you follow all of this, reports like this excellent piece from the New York Times should make more sense to you non-farmers. (I'm not a farmer; I only know this stuff because I just finished writing a book about meat). UPDATE: Here's another long NYT piece about the extent of the drought and its impact on foodstuffs.

And no, I have no opinion on the relationship between global warming and the Awful Summer of 2012. Not that I don't think global warming is "real." Rather it's that having lived in Iowa for nearly sixty years, I know this:

Weather is cyclical. About every seven years, we have a summer that's hotter than bejesus, and about every 15 or 20 years, we get excessive heat and drought at the same time. (Last time was in 1988, which I remember because we had just moved to a new house and it had central air. I'd never had air conditioning, and I remember being SO THANKFUL that we could shut the windows against all the dust that was blowing all day every day.)

For the past three years, we've had glorious summers, so I knew that we were due for a non-glorious summer. And -- ta dah! Here it is, in all its non-glory. I'm still glad to have air conditioning!