How Fast Can the Beef Cow Herd Be Rebuilt?

Recovery from the 2012 drought leaves a legacy on cattlemen to rebuild the beef herd which, according to Derrell Peel,has factors both assisting and restricting it.
calendar icon 24 September 2013
clock icon 5 minute read

Historically, the cattle cycles that the beef industry has observed for many years were self-regulating cycles of inventory, writes Derrell S. Peel, Oklahoma State University Extension livestock marketing specialist.

These cycles were 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).

"At this point in 2013, cow-calf producers appear to have a growing incentive for herd expansion with strong profit prospects and improved forage conditions in many regions."

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.

At this point in 2013, cow-calf producers appear to have a growing incentive for herd expansion with strong profit prospects and improved forage conditions in many regions. Beef cow slaughter for the year to date is unchanged from last year but is down over 13 percent in the most recent two weeks of data and suggests that the beef industry is back on track of decreasing cow slaughter, a necessary component of herd expansion.

However, sharply decreased beef cow slaughter of, perhaps, 8-12 percent for the remainder of the year will result in annual beef cow slaughter down a modest 4-5 percent.

Additionally, there are indications that replacement heifers were diverted into feeder markets in the first half of the year, part of the residual effects of drought, reduced hay supplies and extended winter impacts.

The combination of larger cow slaughter (smaller than expected reductions) and decreased heifer placements is likely to result in a year over year decrease of 0.75 -1.25 percent in the beef cow herd as of Jan. 1, 2014. There are indications that heifer retention will accelerate this fall with cow-calf producers holding more heifer calves for breeding.

Most herd expansions in the past have included one to two years of minimal or modest herd growth before accelerating for two to three years. Herd expansion prospects for 2014 include both factors that suggest potential for faster than normal growth and factors that will limit growth.

The young and productive base herd suggests the potential for one of two years of very minimal cow culling which would contribute to faster growth. A year over year drop in beef cow slaughter of roughly 20 percent in 2014 would correspond to a culling rate of less than 9 percent, a low rate typical of herd expansion.

With such a young herd, an even bigger decrease in cow culling is possible (less than 8 percent) but such a large decrease in cow slaughter might result in significant disruption in lean beef (hamburger) supplies. The sharply higher cull cow prices that would result will mitigate some of the decrease in cow slaughter. At that same time, significantly more replacement heifers may be reported on Jan. 1, 2014, but it will likely include a higher than normal percentage of heifer calves that will not produce a calf until 2015.

The situation described above suggests that it may be possible to see relatively rapid growth in the cow herd in 2014. Though 2013 is likely another year of herd liquidation, the improvement in conditions in the second half of the year may provide the period of herd stabilization (with little or no growth) that often occurs in first year of herd expansion. As long as drought conditions continue to moderate, beef cow herd growth of two percent is possible in 2014 with another 2-3 percent in 2015.

Growth faster than this is unlikely when all factors are considered although slower growth is certainly possible. Among several implications, the reduction in cow and heifer slaughter that this growth implies is expected to lead to a roughly 7 percent decrease in total cattle slaughter in 2014.

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.