The impact of drought on corn and the beef supply chain

An article in Bloombergbusinessweek (February 4, 2013) describes the impact of the drought on corn yields and thus the beef supply chain. Corn farmers were covered by crop insurance but produce worth billions were destroyed by the drought. The corn that did get to market fetched higher prices. Ranchers cut back herds to compensate for the 60 % rise in hay prices. Feeders – intermediaries who buy calves and fatten them, were squeezed by higher prices for cattle and higher feed prices. Beef processing plants have started cutting capacity to match the lowered cattle available to be processed. Beef prices at retail have started increasing in response. Will the higher beef prices swing the supply chain back to its original state as incentives improve across the supply chain ? Or will weather (rain) be the key to restoring the supply chain back to its earlier strength ? Are the federal crop insurance offerings slowing down or speeding up the supply chain response ?

About aviyer2010

Professor
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