Following a two-year expansion period mid-decade, the beef industry's cow-calf sector moved into a liquidation phase in 2007-2009. The number of beef cows on U.S. farms and ranches dropped from 32.9 million at the beginning of 2007 to 31.7 million in January 2009.

Price shocks for feed, energy and other inputs were key factors behind the liquidations in 2007 and early 2008. Industry analysts were encouraged when those high-input costs started to back off in 2008. But the steep downturn in the general economy, starting in late 2008, choked off consumer demand for beef products.

“So the improvement producers saw on the cost side of things was offset on the revenue side,” says Derrell Peel, extension livestock marketing specialist at Oklahoma State University. He notes that cow numbers are now at a 50-plus-year low and calf-crop numbers are at their lowest level since 1950.

The feedlot sector has been equally hard-hit. Through November 2009, U.S. feedlots as a group had seen 30 consecutive months of financial losses, reports Peel. “There's been a tremendous draining of equity through the feedlot sector.”

Looking to the year ahead, Peel believes the liquidation phase for the cow-calf sector has likely run its course.

“We've now moved into more of a station-keeping mode,” he says. “We won't see any kind of major liquidation, but we won't see enough improvement in beef product demand and prices in early 2010 to spark a lot of expansion, either. The industry is slowing making adjustments and realigning profit margins, but it's a long-term process that will take place over the next three to five years.”