U.S. cattle growers who weather high feed prices now will see increased profits next year and beyond, a Purdue University agricultural economist said.
The price of cattle feed and the price of cattle are linked, but also on separate cycles, Purdue Extension economist Chris Hurd said.
With a serious drought affecting much of the nation's corn and soybean growing areas, prices for cattle feed are on the rise. Corn prices have risen 60 percent since mid-June while soybean meal prices are up 25 percent, a university release noted Wednesday.
Those high prices and poor pasture conditions are forcing many cattle owners to reduce their herds and the glut of cattle for sale is undercutting the price of beef.
"In the wake of high feed prices and uncertainty regarding forage availability, calf and feeder cattle prices plummeted," Hurt said in a statement.
"This year's drought likely means further decreases in cow numbers over the next 12-14 months. The impact of the drought is just beginning to show up in some of the national data. We do know the direction, but not the final magnitude," he said.
Hurd, however, predicted the reduction in herd sizes this year will result in tight supplies for the next three years.
"The short-term losses of the next 12 to 14 months will be replaced by large profits in late-2013, 2014 and 2015," he said.
The U.S. Department of Agriculture said herd sizes have fallen 3 percent in the past 12 months. Furthermore, the 2012 calf crop is expected to be down 8 percent from 2006.
Meanwhile, steer prices in Oklahoma, to use one example, have fallen by $35 per hundredweight since mid-June. For a 550-pound calf, that's a drop of nearly $200, the release said.