While Southwest beef producers remain cautiously optimistic that 2013 will be a rebuilding year, the threat of continued drought, spiraling beef prices and a forecast drop in beef consumption has many worried that another year of misfortune could spell disaster for cattlemen hoping to rebuild after two years of disappointing setbacks.

“Quite frankly, we are facing a period of unparalleled challenge in the industry with an expected decrease in cattle production between 4.5 percent to near 5 percent this year and probably again in 2014, the second largest year-over-year decrease in about 35 years,” says Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. “We’re looking at decreases in slaughter numbers and an uncertainty in consumer reaction to higher beef prices.”

Peel says the production shortfall will be offset by lower beef exports and higher beef imports, but predicts beef wholesale and retail prices will rise, providing some relief to beef producers if beef consumption remains steady - which may not happen.

“We’re probably going to see a 3.5 percent drop in domestic consumption this year similar to the year-over-year decrease in 2011 compared to 2010," he said.

In 2011, domestic per capita beef consumption decreased 3.8 percent because of a sharp increase in beef exports despite a decrease in beef production. In 2004 there was a sharper production decrease, but per capita beef consumption that year increased nearly 2 percent because of a sharp drop in beef exports.

“Production losses this year and next could run as high as 10 percent, the largest percentage decrease since the late 1970s, and we could see consumption drop by as much as 5 percent next year, slightly more than this year,” Peel adds. “So recovering from two years of serious drought conditions depends on a sufficiently wet winter and spring season if there is any hope of reversing the trend toward lower production and consumption.”

Peel says he remains optimistic the industry will recover in time, but the question remains when will the drought be broken.

“Another year of extreme drought and conditions could certainly worsen,” he predicted.