NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
April 13, 2000
Since the mid-1980s the U.S. total cattle inventory has been declining, yet commercial production of beef has been increasing. This is largely due to changes in genetics of the cattle herd, which has resulted in increased slaughter weights, says an agricultural economist at North Dakota State University.
"Since we will consume whatever is produced, this growth in production was only going to disappear if aggregate demand increased or the quantity demanded increased due to a lower price," say Dwight Aakre, a farm management specialist with the NDSU Extension Service. "It appears the latter situation has been the case because the real, or inflation-adjusted, price of beef has continued to decline during this period."
When the real price of beef declines at the retail level, consumers need to spend a smaller percentage of their disposable income for beef, Aakre says. Put another way: consumers have more money available for making other purchases when beef prices decline. In contrast, a farmer or rancher's inflation-adjusted income from the sale of animals will not go as far in paying expenses when the real price of beef declines.
"It's important to the future of the beef industry to work on increasing demand as opposed to relying on falling prices to clear the market of excess production," Aakre says. "This will have to be accomplished domestically by convincing consumers of the value of beef in a healthy diet and from increasing export demand as consumers in less-developed countries upgrade their diets to include more protein-rich foods like beef."
Despite the continuous increase in beef production during the last two decades, the 10-year beef cattle cycles continue to occur. Since the cattle cycle peak in the mid-1970s, each successive cattle cycle has peaked at a lower level of total cattle inventory, Aakre says. If the genetic pool results in continued increases in slaughter weights and demand does not grow, each successive cycle will peak at a lower level.
"On the other hand," Aakre concludes, "if growth in demand occurs and the increase due to genetics subsides, there may be room in the future for a growing cattle herd."
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Source: Dwight Aakre, (701) 231-7378
Editor: Dean Hulse, (701) 231-6136
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