The scramble for all classes of cattle will intensify into 2014 because the herd shows no signs of stabilizing until then. Total cattle numbers have declined 14 of the past 17 years, from 103.5 million head on Jan. 1, 1996, to an expected 89 million head on Jan. 1, 2013. That’s down 2% in the past year.

Analysts wonder if net heifer retention will occur even this year. Increased production costs and lower-than-expected calf and feeder prices eroded cow-calf margins in 2012 and producers will be wary of expanding their herds until their pastures are much-recovered. If net retention does occur, more cattle will not start showing up for feeding and processing until late in 2015.

The beef industry has adjusted to the loss of millions of cattle in several ways, notably by improving productivity per animal and better red meat yields. Cattle feeders are feeding to record heavy weights and are selling more cattle on a carcass basis to offset higher feed costs. Carcasses will get heavier again in 2013 but they’re unlikely to achieve the year-on-year increases seen in 2012, analysts say.

A Closer Look: Carcass Weight Reaches Record Level

More beef from fewer animals won’t, however, compensate for fewer head to be fed or harvested. This will exacerbate the 35% over-capacity in the cattle feeding industry. Several factors have already forced thousands of small farmer-feeders out of the feeding business. They were mostly in the Corn Belt where, ironically, the number of cattle on feed in larger feedlots has increased. That’s because of their proximity to cheaper corn and dried distillers’ grains, compared to Southern Plains feedlots.

Southern lots face two regional supply setbacks this year. Excep-tional drought in Mexico forced as many as 1.4 million young cattle to come north in 2012. This helped some feedlots keep their pens full. But Mexican feeder imports might decline by 700,000 head or more this year. In addition, Texas and Oklahoma lost 948,000 beef cows in 2011, largely due to drought. Conversely, Nebraska’s beef cow numbers increased by 112,000 head.

This means fewer calves down south and more up north, with 2012’s national calf crop likely to be down at least 800,000 head. This and the migration to more cattle finishing up north suggest that northern cattle feeding operations might be better positioned the next two years – than those down south – to weather the challenge of finding cattle to fill their pens.

Feedlot operations on the Southern Plains have already begun to adjust to shrinking numbers, though most of these adjustments have not been made public. Pratt Feeders in Kansas, for example, the industry’s 20th largest feeding company, announced in early November it was mothballing a 20,000-head feedlot in Hays, KS. This author subsequently learned that Cactus Feeders, the second largest feeding company, repurposed a 30,000-head feedlot in Syracuse, KS, last summer from a finishing yard to what Cactus calls “for supply chain management.”

Anecdotal evidence suggests other feedlots have stopped finishing cattle and are backgrounding everything from calves to bred heifers to cows. Others continue to explore such options to allow them to keep operating.

But the options are limited, analysts say, because the cattle aren’t there, nor are the cattle feeding margins. This suggests less, not more, opportunity to be a “middle man” operator. That’s likely to be true throughout the U.S. cattle production sector for the next two years.

Steve Kay is Editor of Cattle Buyers Weekly. His column “Meat Matters” appears in each monthly issue of BEEF.