Beef herd expansion: What's the pace?

Beef herd expansion: What's the pace?

Ag economist Chris Hurt examines the pace of beef herd expansion

The nation's beef cow herd has started down the path of the largest expansion in 25 years.

The last major expansion was from 1990 to 1995 when the herd grew by 10%. The industry had started on a modest expansion in 2005 and 2006, but producers aborted that expansion cycle due to the Southern Plains drought and the start of the high feed price era late in 2006.

Related: Beef herd expansion moving faster than anticipated, economist says

Now, with pastures and grassland restored for most of the country and the feeling that feed prices will remain moderate, this expansion is off to a fast start.

Ag economist Chris Hurt examines the pace of beef herd expansion

More rapid expansion ahead
Beef cow operations began the process of expanding the herd in the last-half of 2014. As of July 1, 2015 the number of beef cows in the country was up 2.5% according to the USDA's producer survey. But a more rapid expansion is likely in the coming year according to beef replacement heifer numbers.

Beef heifer retention in January of 2015 was reported by USDA to be up 4%. In the recent mid-year cattle update, USDA says that heifer retention is now 7% higher than year ago levels.

Early indicators are for a rapid expansion. One way to measure the rate of expansion is to observe the number of beef heifers being retained as a percent of the beef cow herd.

In the 1990 to 1995 expansion, that number peaked a bit above 16% and remained at that rate for three years. The mid-year USDA data shows that the current expansion has already accelerated to the 16% rate.

While expansion on the new cattle production cycle has launched out of the gate, the question of how long it will persist will be determined over the next two to four years.

It is not hard to find explanations for why the current expansion accelerated so rapidly. The beef cow herd had been shrunk by the Southern Plains drought and the high feed price era. Between 2007 and 2014, national beef cow numbers dropped by 12%, with the Southern Plains, the largest beef cow region, declining 21%.

Related: Wet weather brings livestock disease concerns

By 2014, per capita beef supplies in the U.S. had shrunk by 17% from 2007 levels. Beef was in short supply and beef and cattle prices responded strongly to the upside. Nebraska finished cattle traded above $160 per hundredweight for the period from October 2014 to May 2015.

More importantly to cow/calf producers, calf prices were also at record highs. Steer calves at Oklahoma City weighting 500-550 pounds had monthly average prices above $275 per hundredweight for the months from October 2014 to June 2015.

Ultimately, abundant grass, low feed prices, record cattle prices, and a rosy outlook combined to entice producers into expansion.

To read the remainder of the report, visit the farmdoc daily entry, "Weekly Outlook: Beef Herd Expanding Quickly, But Will It Continue?" written by Chris Hurt.

TAGS: Regulatory
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