Beef Producers' Dilemma

Beef Producers' Dilemma

The resulting higher prices that producers are fetching may likely encourage them to expand their herds.

According to the recently released 2012 Census of Agriculture, the nation's beef cow herds have dropped to 28.9 million head, a decline of 3.8 million from 2007, says John Grimes, beef coordinator for Ohio State University Extension.

The number of farms with beef cows has also declined to 727,906 with an average herd size of 39.8 cows, compared to 764,984 farms with an average herd size of 42.9 in 2007, according to census data.

Beef Producers' Dilemma

The decline in beef cattle is thanks, in part, to severe to exceptional drought conditions in much of the Southwest, he said. That's led to a strong demand for young steers and heifers, also known as feeder cattle, which this month at one point were fetching $2.095 a pound for August delivery on the Chicago Mercantile Exchange.

In addition, lower feed costs -- and the fact that some older producers are taking advantage of the record cattle prices and dispersing their herds -- are leading many producers to see these market signals as a sign to expand their herds, Grimes says.

"Recent data suggests that this is beginning to occur nationwide, as fewer heifers are being placed in feedlots and being retained as replacements," he says.

While some producers may want to increase the size of their herds, the cost to do so is high, Grimes says.

"Sure, we're in a better place than we were at this time last year with income high and feed costs down," he says. "But the costs to get into the game are more expensive than ever, with feeder calves bringing in upwards of $1,200 a head and replacement females up to 25% higher than a year ago.

"There is cautious enthusiasm among producers, but what holds us back is the long-term nature of livestock production. The lengthy production cycle of 15 to 18 months to get a calf from birth to market is what complicates the decision on herd expansion."

Producers also have some concerns that high beef prices could cause consumers to cut back on beef spending. Beef prices hit a record-high $5.87 per lb. in April, an increase from $5.22 the same time last year.

"It's a double-edged sword," Grimes says "The record prices are the reason producers are seeing increased profits, but a lot of producers are nervous about prices getting so high that it reduces consumer demand."

Source: OSU Extension

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