USDA estimated that there were 29.833 million beef cows in the country on January 1, 2012. USDA’s annual cattle inventory report, to be released on February 1, will provide the year’s first count of the herd, but based on beef cow slaughter and expected heifer retention last year, beef cow numbers were likely 1-1.5% lower on January 1, 2013. Much will be written in this column and others throughout the year about the possibility of the beef cow herd beginning expansion from its 50-year low. While expected record cattle prices point to growth in beef cow numbers, the individual choice for a producer to expand cow numbers is a complex, multi-year decision made difficult by high and volatile input prices.
A number of factors will influence cow-calf producers’ decisions regarding herd expansion in 2013, including availability of pasture, range, and other feedstuffs; land values and rental rates; expected cattle prices for 2013 and beyond; herd productivity; and lifestyle choices. Ultimately, the decision to expand this year will be based on the expected returns available this year. While there are a number of ways to increase cow herd numbers, including retaining additional heifers from the 2013 calf crop or calving retained bred heifers from previous years’ calf crop, in this analysis we’ll focus on buying bred stock so that a calf is available to be sold in 2013.
Let’s examine an enterprise budget projection for a ‘typical’ South Dakota cow-calf operation. Note that ‘typical’ does not fit any one particular operation as costs, productivity, and revenue vary greatly across operations. Therefore, producers should estimate budgets specific to their situation and operation. Still, an average-type budget provides some indicator as to whether the aggregate herd will increase in size this year. In our enterprise budget, we’ll assume that our cow herd has a 92% calf weaning rate and replacement heifers are retained from within the herd. Our operation will cull 20% of its cows each year and will have 2% death loss. Therefore, each cow unit will have available to sell 0.46 steer calves, 0.26 heifer calves, and 0.18 cull cows each year. Assuming that the steer and heifer calves weigh 550 lb and 500 lb, respectively, in October 2013, prices of about $184/cwt and $174/cwt are projected for this fall based on October 2013 Feeder Cattle futures price near $164/cwt and a +$20/cwt and +$10/cwt historical basis for 550 lb steer calves and 500 lb heifer calves in South Dakota. We also project about $75/cwt for cull cow sales in November. Thus, each cow unit generates $830/head in cash revenue in 2013.