Profitability remains precarious other segments of the beef chain late in 2000 but an increase in key cattle prices serves to make a strong female market even stronger.

Q: So when will expansion begin?

A:The start of expansion in cow numbers is likely to begin in the next 12 months.

Sure they've been saying that for a year now but eventually annalist have to be right, right? It's true that beef producers are still not retaining enough heifers to get the expansion underway at this point, but you can't ignore history. And history says we will increase herd numbers in search of increased profits. Producers can't ignore calf profits of $100 to $200 per head.
Ineffective liquidation?

The question is how much can it expand? Cowherd expansion is expected to be moderate in size. That's because even though beef cow numbers have been dropping since 1995, the decline has been a very modest 2 million head. In contrast, the liquidation phase of the previous beef cow cycle from 1981 to 1989 reduced the size of the beef-cow herd by 6-million head.

In addition, total beef production has continued to rise due to the increase in the productivity.

"The amount of beef produced per cow is rising at a rate of about 1.8 percent per year, while demand is only increasing at about 1.3 percent per year," says Chris Hurt, extension economist at Purdue University.

There are other unexpected factors that have worked against the positive affects of beef cow liquidation. Mild weather for two winters played a roll in an unexpectedly higher calf crop in 2000. The estimated calf crop for 2000 was 38.9 million beef calves, reflecting a calving rate of about 91 percent of the size of the Jan. 1, 2000 beef cow inventory. If these calving estimates are true, U.S. beef producers had a calf crop 0.5 percent larger this year than in 1999. So, despite a smaller cowherd, there are actually more calves.

Increased demand

For a couple of years now analysts have pointed to smaller cowherd numbers as a sign that better prices would come. In reality keeping an eye on total beef production, feed costs and consumer demand will be better indicators of future calf prices.

But there is good news. In past years the increases in demand have not kept pace with the increases in production-per-cow that were mentioned by Dr. Hurt. But that may no longer be true. According to the Beef Demand Index, calculated by independent economic and industry experts, beef demand during the first half 2000 averaged more than 5 percent higher than demand during the first half of 1999 and expectation are for continued increases.