How fast can the beef cow herd be rebuilt?

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Historically, the cattle cycles that the beef industry has observed for many years were self-regulating cycles of inventory driven by internal beef industry factors including calf price levels, beef cattle biology and the rigidity of forage resources used in the industry.  It is these factors that influence what cow-calf producers want to do, and that, when combined with the availability and condition of production resources which determine what can be done, result in changes in the beef cow herd inventory.  These decisions by cow-calf producers ultimately determine the cattle supply for the entire industry. 

Most of the cow herd liquidation that has occurred since 2001, including the aborted herd expansion of 2004 and 2005, were the result of external factors including input market shocks that reduced cow-calf profitability; a U.S. and global recession that tempered cattle prices and producer expectations; and severe drought since 2011.  This means that the last 3.4 million head decline in the beef cow herd was not due to typical cattle cycle factors. It has been suggested that the cattle cycle is a thing of the past.  I believe that these other factors have masked and overwhelmed cyclical tendencies through this period and do not mean that the cattle cycle is gone or irrelevant in the future. However in situations where drought has forced inventory adjustments that are counter to what producers want to do, the details of how the adjustments happen become important.  How we got to where we are will have an impact on how herd expansion will take place in the future.

Since 2007, the calculated number of heifers entering the cow herd has remained above average even while the very high rate of cow culling has resulted in net liquidation and reduction in the cow herd inventory.  In a more typical cattle cycle, the rate of heifer placement decreases at the same time as increased cow culling, with both contributing to herd liquidation.  This happened, for example, during the 1996-2001 period of cattle inventory liquidation.  In contrast, during herd expansion, heifer placement typically increases simultaneously with decreased cow culling to result in herd expansion (e.g. during 1991-1995).  In recent years producers have continued to invest in replacement heifers despite the necessity of reducing herd size as a result of external shocks and drought. The fact that the industry has simultaneously increased cow culling and heifer placements in recent years means that the current beef cow herd is not only the smallest in 60 years, but likely one of the youngest and most productive ever.

At this point in 2013, cow-calf producers appear to have a growing incentive for herd expansion with strong profit prospects and improved forage conditions in many regions. Beef cow slaughter for the year to date is unchanged from last year but is down over 13 percent in the most recent two weeks of data and suggests that the beef industry is back on track of decreasing cow slaughter, a necessary component of herd expansion.  However, sharply decreased beef cow slaughter of, perhaps, 8-12 percent for the remainder of the year will result in annual beef cow slaughter down a modest 4-5 percent.  Additionally, there are indications that replacement heifers were diverted into feeder markets in the first half of the year, part of the residual effects of drought, reduced hay supplies and extended winter impacts.  The combination of larger cow slaughter (smaller than expected reductions) and decreased heifer placements is likely to result in a year over year decrease of 0.75 -1.25 percent in the beef cow herd as of January 1, 2014.  There are indications that heifer retention will accelerate this fall with cow-calf producers holding more heifer calves for breeding.

Most herd expansions in the past have included one to two years of minimal or modest herd growth before accelerating for two to three years.  Herd expansion prospects for 2014 include both factors that suggest potential for faster than normal growth and factors that will limit growth.  The young and productive base herd suggests the potential for one of two years of very minimal cow culling which would contribute to faster growth.  A year over year drop in beef cow slaughter of roughly 20 percent in 2014 would correspond to a culling rate of less than 9 percent, a low rate typical of herd expansion.  With such a young herd, an even bigger decrease in cow culling is possible (less than 8 percent) but such a large decrease in cow slaughter might result in significant disruption in lean beef (hamburger) supplies. The sharply higher cull cow prices that would result will mitigate some of the decrease in cow slaughter.  At that same time significantly more replacement heifers may be reported on January 1, 2014 but it will likely include a higher than normal percentage of heifer calves that will not produce a calf until 2015. 

The situation described above suggests that it may be possible to see relatively rapid growth in the cow herd in 2014.  Though 2013 is likely another year of herd liquidation, the improvement in conditions in the second half of the year may provide the period of herd stabilization (with little or no growth) that often occurs in first year of herd expansion.  As long as drought conditions continue to moderate, beef cow herd growth of two percent is possible in 2014 with another 2-3 percent in 2015.  Growth faster than this is unlikely when all factors are considered although slower growth is certainly possible.  Among several implications, the reduction in cow and heifer slaughter that this growth implies is expected to lead to a roughly 7 percent decrease in total cattle slaughter in 2014.

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TX  |  September, 03, 2013 at 04:57 PM

I've been reading these articles of projected beef herd expansion for almost the past decade. Never has expanded. At my grass roots level, I see more and more producers liquidating their herds every day. Sometimes it is drought related, sometimes it is producer age and death related, or other reasons. Average age of producers continues increasing. Then you have the factors like who wants to be bossed around by NCBA and meat packers who don't want COOL, yet at the same time they continue to push non-disease tracking systems and "vertical integration" systems onto the domestic producers for their profit, not the producers. Add to that the coming EPA "cow farts regulation" and other USDA regulations. Who would want to get in or back into business???

September, 04, 2013 at 10:11 PM

I agree, there are more factors than just forage that influence cow herd rebuilding, in particular the age of the producers. For years the Packers have exploited the unpaid labor and capital of the small and mid-sized producer. I should know because I was one of them. That is over, every year there are fewer and fewer people willing to work for nothing just because they always did. The packers and the whole industry never acknowledged that they needed the smaller low cost producer to cost average the more expensive cattle produced by the big producers. People who write articles about herd expansion and effects of available grass are living in a dream world and ignoring the more important factors. And do the packers actually want more cattle? I've yet to read where one packer has indicated much less demonstrated by price that they want more cattle. The key to packer profits is a smaller herd where they control the supply. The true is that much of the land that once produced cattle and could again is too segmented for large operations and is only suited to small operators, especially the land where the feed supplies are reliable like in the east and south. Until the industry figures out how to reward the small producer and even then restart production in these areas herd expansion is limited.

montana  |  September, 03, 2013 at 10:50 PM

until the universities take into account the age of the industry the models will not work. There are a lot of ranchers that are running below 100 percent stalking rates because they have supplemental income. ie social security. These ranches are not big enough for the next generation to come back and raise a family but big enough for a retired couple to keep milking it along. Our industry is dying and nobody is doing anything to help it. ie making the older generation think it is a good idea to sell, to let the industry thrive.

corrine wynne    
September, 04, 2013 at 09:51 AM

They dont mention what ya all really do. You just send your cattle to fatten at blm lands and send horses to slaughter. Your western cattlemen just keep absorbing the land while men like commenters below go belly up. Central and eastern states cant use blm land and neither can wild horses. Why dont yiu tell the truth, congress knows it. Farm bureau knows it, your using public forage and you collect cash. We know its true.

SD  |  September, 04, 2013 at 03:42 PM

The previous comments apparently from TX, MT, and LaLa Land indicate possible reasons for lack of expansion of the cowherd may well be ignorance of facts about ranches today. Some who comment claim NCBA has only 3% of cattle producers as how on earth can they control anything, let alone ranchers??? Yet, it apparently does have the largest dues paying organization of cattle producers. Sure haven't seen any 'vertical integration' demands at the meetings over the past 50 years of my involvement. Yes, working with other segments of the cattle/beef business to improve the product consumers get from us does come up, and has been a sound idea for many people still raising cattle today. Not sure, with an average cow herd of about 43 head it seems doubtful anyone who is just 'average' could live on what their cattle produce as income, so it is either off the ranch job for someone, or social security for the 'elderly' among ranchers. I'll bet there are plenty of 'public lands ranchers' who have yet to see that 'gravy train' of benefits of having Uncle Sam as their landlowd! Ms. Wynne, when you force them all off that land, don't you know they will use their big stash of money to buy YOUR land????

TX  |  September, 05, 2013 at 10:49 AM

I was told at a "Ranching for Profit" seminar that if you use any outside income (land value, oil, off ranch job, govt. subsidy, inheritance, etc...) to supplement your cattle operation, which even the largest ranchers do, then you are not truly ranching for profit with your cattle.

Darryl Byrd    
MS  |  September, 07, 2013 at 12:27 PM

Someone please explain to me why we would want to rebuild the cattle numbers, seems to me if that happens the price will drop and when that happens the input cost will not follow the price down. I could understand rebuilding if we were in dire need of beef, but I do not think that is the case. If it were not for the export market we would have excess beef now. The size of the cattle killed has gotten bigger as the numbers go down and I'm sure that has had some negative effects, but they seem to be manageable. I have raised cattle all of my life and this is a good market and my margins are bigger than ever. High prices and rising input cost beat low prices and rising input cost. Tell me where I am going wrong?


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