We used to talk about a 10-year cattle cycle, and the trend was pretty clear. When cattle numbers reached a level high enough to depress prices, producers would begin scaling back, culling cows and selling more heifers rather than retaining them for breeding. After about five years of liquidation, prices would improve enough to encourage expansion, and numbers would trend upward for about five years, creating the familiar cycle.
Using selection tools for bulls and heifers, producers have an opportunity to ensure their replacement heifers are the best females in the herd and work toward long-term genetic progress. So far, the 21st century has brought a different pattern, with U.S. beef cow numbers in decline since 2001. What began as a rather typical cyclical phase morphed into long-term liquidation as outside forces, including BSE and related trade restrictions, growth in ethanol production, rapidly rising grain prices, associated inflation of land prices, recession and, most notably, drought, sti_ ed any e_ orts to rebuild herds.
Early in 2012, many analysts expected to see a reversal of the liquidation trend, based on an outlook for strong cattle prices. Farmers were planting record corn acreage, and it appeared the Southern Plains area could be emerging from a devastating multi-year drought. But as the season progressed, drought spread across cattle country and into the Corn Belt, devastating pasture and range production, driving corn prices to record levels and leading to another year of contraction.
Drivers of expansion
So will the trend reverse in the near future? University of Missouri livestock economist Scott Brown, PhD, thinks so. He says cattle producers can expect corn prices to dip to 2010 levels, easing the heavy burden of high feed costs producers have had to carry through consecutive years of drought. In addition to lower feed costs, which he expects to drop to $4.50, Brown says market fundamentals suggest 2014 calf prices $50 per hundredweight higher than four years ago, with fed-cattle prices also increasing significantly. “The outlook for 2014 is a lot different from anything we’ve seen in a long time,” Brown says. “It’s an exciting time to be in the cattle business.”
Oklahoma State University livestock marketing specialist Darrell Peel agrees, saying the 3.4 million-head decline in the beef cow herd since 2001 was not due to typical cattle-cycle factors. He points out that since 2007, the number of heifers entering the cow herd has remained above average even while the very high rate of cow culling has resulted in net reduction in cow numbers. 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. The fact that the industry has simultaneously increased cow culling and heifer placements in recent years means the current beef cow herd is not only the smallest in 60 years but likely one of the youngest and most productive ever.