A new year, the start of a new millennium, and perhaps the start of a new stage in the beef cattle cycle.
Cow-calf producers were highly profitable in the year 2000 and all indicators point toward continued profitability in the coming three or four years. With profitability comes the urge for producers to expand, increase their herd numbers and take advantage of profit margins ranging between $100 and $200.
Improving upon great returns from last year's calf crop, calf prices are projected to average $5 higher in 2001 compared to 2000. There are a couple of reasons why:
- Tight available supplies
- More heifers held back for replacements
- Mostly stable corn prices
- Optimism in the feeder segments
Profitability for cow-calf producers
means the average value of production females will continue to climb. Bred cows and cow-calf pairs are expected to cost you between $800 and $900 this year. The peak in bred cow prices is not expected until 2003, according to Cattle-Fax analyst. If you are con-sidering adding numbers to your cowherd your best bet is to buy bred females already in production to take advantage of the next few years of calf profits. Developing heifers now
will delay your return on investment for at least two years and profitability will be starting its cyclical decline.
The Jan. 1, 2001, U.S. Department of Agriculture cattle report has not been released as of press time but early projections are that it will tell us that beef cow numbers will total 34.0 million head. High calf prices greatly reduced cow slaughter last year, as older cows just weren't sent to town in hopes of squeezing out that one more calf. The result-total beef cow numbers actually increased over last year's estimates because of fewer culls. But alas every cow has to go some time. Slaughter cow values will trend higher this year pulled by higher fed cattle values and tightened beef supplies. Prices for slaughter cows that averaged near $40 per hundredweight during 2000 are expected to be $4 to $5 higher this year.
The beef cowherd estimates, if they're correct, tell us that the liquidation phase of the cattle cycle is most likely over. However, expansion of the cowherd has yet to really get started. Lack of water or forage kept many producers from retaining any heifers in 2000. In fact a record high 33.3 percent of all calves placed on feed were heifers. Analysts predict that there will be 150,000 more replacement heifers on Jan. 1, 2001, than a year ago, totaling 5.7 million head of replacement heifers.
Remember, total beef production has reached record-breaking heights, despite a smaller cow herd, so total numbers are less important to profitability than demand.