Previous articles (Part 1 and Part 2) have discussed several challenges and opportunities related to the how and where of rebuilding the U.S. cattle herd. This article discusses the most important asset of the U.S. beef cattle industry…the “who” of herd rebuilding. It is people…the cattle producers…who make it happen and are the key to rebuilding the beef cow herd and expanding cattle inventories. As with the land use and regional components, there are both challenges and opportunities with regards to the producer issues in the beef industry.
Like farmers of all types, cattle producers have been aging as a group for many years. USDA data from 2011 indicates that among the 654,000 cattle farms in the country, 37 percent are operated by producers 65 years of age or older and another 29 percent are operated by producers aged 55-64. Together these two age groups operate 64 percent of land used for cattle production. This includes 118.4 million acres by the 65+ producers, 66 percent of which are the full owners of their farms. In many cases there are no family heirs interested or able to take over the operation.
These demographics suggest that a significant amount of asset turnover is inevitable in the next decade. In the meantime, older cattle producers, like many farmers, often don’t really retire and exit the industry but rather tend to “retire in place” by remaining on the farm and gradually scaling back their operations. Older producers, on average more financially secure, can afford to cut back by reducing cattle numbers or switching to less labor intensive enterprises according to their health situation and labor ability. The latest USDA data confirms that cattle producers over 65 years of age have a per farm value of production that is 43 percent less (25 percent less on a per acre equivalent basis) compared to the average value of production of all cattle farms. In the most recent data, average farm size for these older producers has dropped to roughly 75 percent of the average of all cattle farms. Previous data had indicated that farm size for the older producers was only 8-10 percent less than average. It is possible that asset turnover in the cattle industry has accelerated recently.
The combination of these producer demographics and the drought creates a unique situation in the cattle industry. The drought has forced many of these older producers to partially or totally liquidate their herds. Some of these older producers are not inclined to or will not be able to rebuild their cattle operations. The drought is forcing some producers to face the inevitable decisions about exiting the industry sooner rather than later.