Many Alabama cattle producers continue to reduce their herds because of last summer's drought. Those selling cattle now simply do not have the hay and other feedstuffs to carry the animals through the winter, nor do they have the extra cash to buy feed.
The average person might believe this increased supply of cattle on the market would be driving prices down. But Walt Prevatt, an agricultural economist with the Alabama Cooperative Extension System, says that is not the case due to other economic factors (improved beef demand and cheap feed costs).
"I think what we're seeing is the reverse of what usually happens. Usually when prices are high, the on-farm cattle inventory grows," Prevatt said. "But because of the drought, just the opposite is happening. farmers are reducing their inventory because they can't afford to feed the animals."
Prevatt points out that the cattle inventory in the United States is in a downward transition. At the beginning of 2000, there were 98 million head of cattle and calves in the inventory, down one percent from 1999. Inventory in Alabama dropped three percent over the same time period. Total cattle numbers in Alabama are at the lowest point in more than 10 years.
In addition, there has been a drop in the state's calf crop in the last several years, as well as the number of replacement heifers retained on Alabama farms.
"Reduced inventory (total number of cattle) means less beef is on the market, and this helps support prices," he said.
Cattle prices are being supported by other economic factors including improved consumer demand for beef and cheaper corn costs.
Prevatt adds that the drought caused problems outside of Alabama as well. Most of the southern and western states were affected by the drought.
He thinks the future looks good for cattle prices in the next few years.
"I expect cattle inventory numbers to continue to decline in 2001, while at the same time, I believe cattle prices will begin to move higher this year. We are in the upward transition phase of cattle prices of the current cattle cycle. Inventories would normally begin to build as the price rises, but the long-reaching effects of the drought are going to keep the cattle inventory down."