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.