Profound change usually occurs too slowly, across too many years to identify, until it seems to arrive out of nowhere in full bloom.

Maybe that’s why only recently, at least a pocket of folks have gotten serious about questioning the sustainability of the U.S. cattle and beef industries. That’s what this ongoing series will explore, by industry sector, during the coming months.

The impetus has been the continued liquidation of the nation’s beef cowherd, despite the type of prolonged increase in cattle prices that historically signaled herd expansion.

“Despite worldwide population demand for beef, the U.S. beef industry is contracting,” says Barry Dunn, dean of South Dakota State University’s College of Agricultural and Biological Sciences. “For the first time, we’re questioning the sustainability of the beef industry in the U.S.”

This year’s calf crop was the most paltry since 1953; the beef-cow population is the smallest in 57 years. According to USDA’s midyear cattle report, both beef-cow and beef replacement heifer populations declined 2% compared to the previous year. According to midyear baseline projections from the Food and Agricultural Policy Institute at the University of Missouri, another 800,000 or so cows will leave the industry by 2014 before herd expansion begins.

It’s the end again

Rumblings about producer attrition and the future of The Industry have been there for decades, of course.

In the early 1970s, it was the beef price freeze. In the 1980s, it was the agricultural crash spawned by too much leverage, super-inflation and nosebleed interest rates. In 1990, it was beef packer concentration doubling in a decade to 72%. And about that same time, it was all about declining domestic consumer beef demand that ultimately dropped about 1%/year for 20 consecutive years.

In the new century, it’s been everything from activist-group lamebrains, to the commodity bubble and locking the value of grain with that of oil. You get the idea.

Baby Boomers and those following them can be forgiven for taking for granted that all they’d known about The Industry since they’d been alive and worked in it was all that it had ever been. Consequently it’s easy to understand the assumption that The Industry would always be the same.

In the simplest terms, The Industry was defined largely by public policy and economic structures forged in the aftermath of World War II. That’s when the federal government got serious about ensuring domestic food security through the use of crop subsidies. Subsequently, cheap corn begat the modern cattle-feeding industry specifically and the broader industry overall that covets pounds of production above all else.

For cattle producers, everything since, from the advent of growth implants in the 1950s and ’60s, to the introduction of Continental breeds in the 1960s and 1970s, to improved vaccines, has been geared toward increasing both production and production efficiency. That’s what the market said to do. Through grit, creativity and perseverance, that’s what The Industry has done, with a vengeance.

Though last year’s harsh winter hammered feedlot performance, carcass weights are still higher on average this year than a year ago. Carcass weight grew to about 850 lbs. on average last year; it’s grown roughly 100 lbs. since 1989.

Fewer outfits, more production

Increased production in the name of reducing production costs continues changing the size and scope of agricultural and beef production in the U.S.

According to USDA’s Economic Research Service (ERS), 91% of U.S. farms are classified as small – defined as generating an annual gross farm cash income (GFCI) of $250,000 or less. Approximately 60% of those are classified as very small with a GFCI less than $10,000. Small farms account for 23% of agricultural production.

For perspective, farms with annual sales of $1 million or more represent just 2% of all U.S. farms, according to USDA, but about 53% of the value of annual production.

In “Small Farms in the U.S.: Persistence under Pressure,” ERS authors say: “U.S. farm production continues to shift to larger operations, while the number of small commercial farms and their share of farm sales continue a long-term decline. Larger farms have competitive advantages over smaller farms and commodities, reflecting economies of size in farming. Nevertheless, about 800,000 of the 2.2 million U.S. farms in 2007 were small commercial farm operations.”

The same type of concentration exists among beef-cattle operations. Last year, according to the National Agricultural Statistics Service, 20.6% (155,000) of operations with beef cows (herds of 50 cows or more) accounted for 71.7% of the nation’s beef cowherd.

“Because larger farms realize higher-than-average financial returns and because many operators of small commercial farms are over 65 years old – especially those with GFCI of less than $100,000 – competitive forces will likely continue to reduce the number of small commercial farms and shift production to larger farms,” say the USDA folks.

Keep in mind that virtually all farms in the U.S. are family farms, no matter the size.

There’s no bogeyman

In response to the symptoms of industry change, some folks continue to look for the culprit.
Surely, there must be some part of The Industry engine that can be tinkered with or rebuilt. That’s what
the Industry has always done. Sometimes the industry engine hummed, sometimes it sputtered, but it always ran. There may be fewer folks and cattle, but the engine will keep running; surely it must.

Could be. Hopefully it will be. But it may be within a different context than anyone is even now able to imagine.

The Berlin Wall came down all at once, but the geopolitical jackhammer was fracturing the foundation long before.
The smallest calf crop since 1953, the fewest beef cows in 57 years, just like that.

“We’ve lost a third of the cattle producers we had in 1980 and the infrastructure is eroding,” Dunn says.

“Many of our assumptions about the industry appear to have been naïve.”

Next month: A look at the current cow-calf model.