WEST LAFAYETTE, Ind. — Purdue University experts predict a changing environment for cattle and hog farmers, including higher futures prices and lower feed costs.

Jim Mintert, director of Purdue’s Center for Commercial Agriculture, recently led a webinar on beef and pork industry profits.

“The all-time inventory for beef took place back in the mid-’70s, and we have now declined rather precipitously since that level,” he said.

“This year’s inventory (is) at 87.7 million head — that’s roughly 2 percent smaller than a year earlier and 9 percent smaller than the most recent peak in inventory, which was back in January of 2006. It’s also the smallest cattle herd inventory since the early 1950s.”

As herd size goes down, inventory of beef cows also is expected to decline. Jan. 1 inventory was at 29 million head and is expected to drop.

Reductions in herd size and the size of beef cattle inventory are leading to much smaller slaughter levels, Mintert said.

Slaughter levels were around 32.5 million head last year. The number is expected to go to a little more than 30 million in 2014 and around 20 million head in 2015.

“If you look at 2015 projections relative to 2013, there’s a decline of about 10 percent in cattle slaughter,” the director said. “The smaller levels are giving us smaller beef production.”

Smaller beef supplies, in turn, lead to drastically higher prices, making the industry more profitable.

On the downside, the industry is losing market share as consumption of red meat is going down, Mintert said.

Hog Concerns

The hog industry has a similar situation to cattle, but is faced with the challenge of porcine epidemic diarrhea virus. A recent outbreak of PED is affecting survival rates of baby pigs.

“We typically hear 100 percent loss for three weeks until animals can build immunity,” said Chris Hurt, Extension specialist at Purdue.

“We first saw it back in the spring of 2013 in the U.S. As we moved into cooler weather, we saw more testing and more herds showing up positive. It’s common for producers to talk about dreadful losses over a three-week period to little baby pigs.”

The potential impacts of the disease still are unknown. Hurt predicted that those hit hard by the virus may struggle to balance costs with revenue.

Those who are less affected by the outbreak may see more positive results.

“When you cut supply 2 or 3 percent you raise prices enough that revenues go up,” Hurt said. “It will also raise the cost of raising those pigs.

“If average or less with PED losses, benefits of higher prices may make them better off. Profitability is high. There will be a lot of recovery and good returns for the hog industry, as well as a need to watch the PED virus very carefully.”

He said there likely will be an era of moderation in feed prices, helping costs around the livestock sector as a whole.