At first glance, it appears the American beef sector is riding high. Record prices are being paid by packers (processors) to farmers, the sector is worth more than $70bn (€55bn) and there are more than two million beef and cow-calf (suckler) farmers.

However, despite these positives, the sector is enduring a very difficult period. Cattle numbers are under pressure, farmers are going out of business and beef consumption rates are under constant pressure.

The national herd is at its lowest since the 1950s and some states have the lowest herd numbers since before the Wall Street crash of 1929. More than 50% of the total value of US sales of cattle and calves comes from the top five states, namely, Texas, Nebraska, Kansas, California and Oklahoma.

However, these five states have been enduring a severe drought for the past five years which has resulted in a significant depletion of their cattle herds. As of 1 August 2014, the American national beef herd stood at 95 million head, down 3% in just 12 months.

This shrinking of the herd has had a number of knock-on effects. The most obvious effect is that with the shortage of supply, prices have risen steadily as the shortage has become more evident.

Speaking to the Irish Farmers Journal in Washington DC recently, Dr Mildred Hayley, an economist with the American Department of Agriculture (USDA), predicted that the highs of 2014 will “most likely last until 2017”.

Dr Hayley said that severe drought in the southwest has resulted in cattle prices never seen before.

“All indicators point to beef prices continuing as they are for the foreseeable, perhaps as far as 2017,” Dr Hayley told the Irish Farmers Journal. “The shortage in cattle numbers isn’t going to end any time soon. Numbers are low and won’t recover in the short term so it could well continue on as long as that,” she added.

Price rises

While prices have levelled off in recent weeks, successive rises had meant beef farmers are obtaining prices in the region of $1.66/lb (€2.77/kg) liveweight. A price of 80c/lb was commonplace a few years ago. The vast majority of beef finishers in America are paid a liveweight price for cattle before processing. Most cattle are killed out at a liveweight of about 1,400lb (635kg).

Keith Burgett farms red and black Angus cattle in Ohio and he too is confident of the high price holding firm for the foreseeable future. Burgett sells his purebred Angus heifers to local farmers when the heifers are between 12 and 14 months old.

“Those states are probably in the middle of an eight- to 10-year drought,” Burgett said. “The farmers in the south-southwest are having a real tough time just keeping their heads above water, just about surviving. It’s not to wish ill on those guys but it has been great for the rest of us. We have plenty of grass all year, a little more rain than we expected, but it has driven the grass on.”

The other major fallout from the drought was a migration of cattle herds from the traditional beef-rearing states in the south to states in the north and northwest, where tillage and dairy production had been larger in the past.

Cheap corn

This migration has been in response to the ready availability of cheap corn for feed. Corn prices have slipped to a five-year low after a larger than expected harvest – the USDA estimates it at 14.4bn bushels (366m tonnes), with an average per-acre yield of 171.7 bushels (4.28t). The yield bushels is 3.4% ahead of last year’s crop, which was described as being “bumper” at the time. Current corn prices stand at $3.23/bushel (€99/t).

Ohio is one of the states that has seen an increase in beef cattle numbers. Burgett said he has noticed the increase in numbers, but it has not adversely affected prices.

“The cattle that we don’t sell for breeding, we sell locally at a cattle auction and prices have been great. We mostly sell calves at around 10 to 12 months when they are weaned to a feedlot owner or to another farmer who will bring them for fattening. We average around $1.65/lb or so. It has been a pretty good year,” he added.

Fraught relationship

Similar to Ireland, the farmer-processor relationship has long been fraught and fractious in the States.

Colin Woodall of the National Cattlemen’s Beef Association (NCBA) said that over the last decade, relations have improved to the point of now being productive.

“The relationship between farmers and packers was dreadful, really dreadful. There was distrust as well as fear from the farmer. The assumption was that the packer was trying their best to cut the farmer at all times, and there was some truth in that. Now everything runs much smoother and it’s really down to a few simple things. The packers published their slaughter numbers, they set a mandatory price and engaged more with farmers on how they want cattle,” Woodall said.

Woodall said pressure has always come on farmers in the US from packers to produce cattle younger and lighter for finishing but farmers, almost in unison, rejected the calls.

The NCBA has also played a role in delivering a new form of steak, known as the flat-iron steak, as a way of boosting flagging beef consumption in the 1990s. The flat-iron steak is taken from a cheaper cut from the shoulder.

The steak was developed by the research teams of University of Nebraska and the University of Florida as a result of funding from the NCBA. Woodall said the research has proved to be a success, with consumption rates improving. The average US person consumes about 24kg of beef per year.

Retail giant Walmart has also done its part to help consumption rates. In each of its stores it has a diagram of the different cuts and how best to cook them. It is this level of marketing which Woodall believes is helping to boost the sector.

“We had to look, to change and to innovate. We can’t always assume that folk will continue to eat beef. We have to give them new things,” he added.

A total of 3,491 miles separates Ireland and the state of Ohio, where the Irish Farmers Journal carried out a recent study tour. While the world’s second-largest ocean and a few time zones separates the two, there are huge similarities in terms of farming and rural life.

In week two of the series on farming in America, we saw that the dairy sector is growing at a rapid rate, with domestic and international expansions on the agenda.

Optimism

Optimism among dairy farmers is high. Like Ireland, farmers are buoyed not only by the sector’s expansion plans, but also the strong prices they are receiving. For August, dairy farmers received as high as a euro equivalent of 41c/litre. The focus for the US export growth is, like Ireland, on southeast Asia.

The beef sector is clearly the poorer relation in the US, despite its scale. With 95m head of cattle and a sector worth €55bn, farmers, like here, are price dependent. High prices in the States are being driven by a chronic shortage of supply.

Fracking

We also looked at the windfall farmers are receiving from fracking in the United States. However, there are still major unanswered questions over the long-term reserves of shale gas in the US as well the concerns over the environmental safety of the process.

Finally, huge credit must go to Irishmen Jim Galvin and Eamonn Byrne who have become major players in the rapidly developing ethanol sector. With an impressive turnover and growth on the agenda, their efforts must be lauded.