Herd Size

Heifer Economics: Calculating Replacement Costs in Today's Market

Thu, 21 Aug 2025 15:54:39 GMT

As beef producers consider expansion, key expenses to consider are the cost of buying versus the price of developing your own replacements.

Oklahoma State University’s Mark Z. Johnson says there is evidence of an increase in heifer retention with improved drought conditions across much of the Central Plains and summer video auctions reporting a smaller percentage of heifer calves.

“Retention does not appear to be aggressive,” says Johnson, Extension beef cattle specialist, in a recent Cow-Calf Corner newsletter. “With the calf market on pace for another year of record prices providing incentive, herd rebuilding remains sluggish compared to past cycles.”

Lingering drought continues to limit forage availability in key regions while high interest rates and the substantial capital required to develop or purchase bred females further suppresses expansion. Many producers also remain wary of a repeat of the post-2014 market correction, adding a layer of caution to long-term decision-making.

“Even with bred female values at record highs, relative to calf prices, breds may still be undervalued, a sign of producer hesitation rather than a lack of economic feasibility,” Johnson explains.

He says an excellent metric to consider when purchasing bred heifers is the number of calves it takes to pay for the purchase. CattleFax recently reported in 2025 that figure is projected to average just 2.75 calves, well below the long-term average of 4.5 and far beneath the 2015 peak of 9 calves.

“This ratio is likely to rise over time, driven by higher bred female prices, moderating calf values, or a combination of both,” he explains. “If feed resources allow, this dynamic suggests that adding females to the herd today may be the best time from a breakeven perspective to expand.”

(CattleFax)

Keeping Replacements vs. Buying Bred Heifers

Johnson stresses replacement heifers are expensive; not only with respect to dollars invested but also the expenditure of time and labor involved.

“Recent market reports indicate 550-lb. weaned heifer calves selling for well more than $2,000 per head. Those heifers calves are still two years away from weaning their first calf if all goes according to plan,” he explains. “Accordingly, operations looking to add inventory may find a better option of purchasing bred heifers in the current market.”

What Should Bred Heifers Be Worth?

Johnson says assuming weaned calves remain at a value of $2,000 to $2,500 per head over the next few years, your annual cost of running a cow will largely determine what you should invest in a bred heifer.

“The annual cost of maintaining a beef cow is highly variable and has increased tremendously over the past five years,” he explains. “Variable costs such as fuel, fertilizer and herbicides have been blamed as the primary culprits; however, fixed costs such as equipment, hired labor and land have increased as well.”

Total economic costs associated with U.S. cow-calf production for 2018 were estimated to range from $910 per cow for operations with 500 or more cows to $2,099 per cow for operations with 20 to 49 cows.

“These results show significant economies of scale, with costs per cow declining with increased herd size,” Johnson says.

Kansas Farm Management Association estimates the annual cost of running a cow to be approximately $1,551 according to data collected in 2024.

Johnson says it is noteworthy that pasture and feed only account for $684 of that total. Visit AgManager.info for a detailed breakdown of the other actual expenses.

Market fundamentals are strong for a continued robust cattle market until cow inventories start to climb.

“There is currently not much indication of that happening anytime soon,” Johnson summarizes. “That being said, what bred heifers are worth to your operation, and how many calves a female needs to raise in order recapture your initial purchase price, will depend on how much profit she nets each year per calf rather than on the gross value of each calf she produces.”

Nalivka: Herd Rebuilding – A Weighty Financial Decision

Thu, 05 Jun 2025 14:50:38 GMT

As prices across the beef supply chain have hit record highs, industry discussions have become increasingly focused on the question of heifer retention and herd building — regarding both the timing and the extent. As they always have, I have little doubt that record prices will provide plenty of motivation to expand herds — some herds. While soaring prices encourage herd building, they can also become an obstacle.

Herd building, involving heifers, whether through heifer retention or buying bred heifers, is a financial decision on the part of the cattleman and timing is part of that decision. The decision to retain heifers and expand the cow herd to take advantage of a strong market involves foregone income in the current year. The motivation is to generate added revenue once that heifer has a salable calf and that motivation is reasonable. However, that additional income from another calf is two years down the road at the earliest with added production costs to bring that heifer into the cowherd with a marketable calf.

Looking at the numbers, in today’s record-high market, the foregone income part of that decision is running around $1,800 to $2,000 per head based on prices for 550-lb. heifer calves. And then, there is the added production cost for that heifer, which is real and though highly variable across the country and between cow-calf operations, it likely averages nearly $1,000 annually. Again, the rancher’s motivation to increase income through building the herd to sell more calves at record prices is reasonable, but the analysis is not that simple. Those prices are just that — current. Markets change and the potential of a marketable calf is two years away. In markets, two years is a long time!

So, how about buying a bred heifer? That decision does not involve the foregone income from a heifer calf that was not sold with the calf crop. However, that foregone income is now invested cost, which is higher. While the time to generate income from a calf is shortened by one year versus retaining your heifer from this year’s calf crop, prices for bred heifers are generally ranging around $3,500. That is no small figure! Since this discussion centers on heifers and heifer retention, buying bred cows or pairs to build the herd is not relevant to this discussion.

The analysis and discussion of herd building goes beyond record-high markets. It is an important financial decision made by ranchers and farmers and that decision goes beyond current market conditions in a changing market environment. My market outlook discussions have included these points as part of my analysis.

Your Next Read: Five Pre-Pasture Turnout Tips

Nalivka: What’s Impacting the Pace and Extent of Herd Building?

Mon, 27 Jan 2025 14:23:41 GMT

U.S. cattle inventory is largely driven by smaller producers with fewer than 100 cows. According to the 2022 Census of Agriculture, 557,075 cow-calf operations run fewer than 100 cows, which accounted for 89.5% of total cow-calf operations and 39.5% of the total cows. In 2022, the total number of operations represented a 15% drop from the 2017 Census. While the operations with 100 cows or less accounted for about the same percentage of the total cow-calf operations in 2022 versus 2017, they accounted for a smaller percentage of the total cows — down from 44% in the 2017 Census.

I have once again thrown a lot of numbers at you, but the point is that from 2017 to 2022, there was a significant decline in the number of operations with fewer than 100 cows and these operations held a smaller percentage of the total cows.

While some operations increased their cow numbers and moved up the scale in the census survey to 100 to 499 cows, there were also many that simply exited the industry. This would have been evident in the 2022 survey when drought and financial issues prompted liquidation. Unlike herd liquidation in previous cattle cycles, many cow-calf producers exited the industry for good. If that is indeed the case, their permanent departure will be a major factor impacting both the pace and the extent of herd building going forward.

The 2022 Census supports movement toward larger operations. The two groups of operations to drop in number were those with a herd size fewer than 100 cows and 100 to 499 cows. All other operations increased in number of operations. While the total number of operations fell from 2017 to 2022, the number of operations with 500 to 999 cows increased 19% from the 2017 survey and 8% from 2012 to 2017.

Expansion or liquidation of U.S. cattle numbers is mostly driven by small operations. I do believe the decline in their number will impact the pace of herd growth going forward.

7 Ways to Help Beef Producers Evaluate Potential Replacement Heifers

Mon, 02 Dec 2024 19:16:35 GMT

Given the price of replacement beef heifers today, one of the questions veterinarians are helping cow-calf producers address is whether it’s a better decision to raise their own calves for replacements or buy them.

The answer, like with many complex decisions, isn’t a simple yes or no, according to Dr. Ray Stegeman.

The Missouri veterinarian says he has cow-calf producers who do raise their own replacements, but it’s not a practice he recommends for everyone.

“I work with quite a few smaller family farmers who keep heifers and are successful with that. But they know the mama cows and everything about them going back 50 years, which has merit,” says Stegeman, who owns Osage Veterinary Clinic in St. Thomas, Mo., and is a member of the Production Animal Consultation (PAC) network. “But if a producer is just starting out, it’s often advisable to buy bred heifers, given the economics of developing a heifer and the time involved.”

Stegeman, referencing research at Texas A&M and University of Nebraska, says a 200-cow herd size is often a practical starting point for deciding whether buying or raising replacement heifers is the better option.¹

Size Of Calf Crop And Resources

There are several reasons why a 200-head cowherd is a good minimum threshold. For one thing, there’s a large enough calf crop born to provide an adequate number of high-quality prospects for the farm. Three other considerations: this size of operation often has adequate manpower, physical facilities and land necessary to make the undertaking feasible and worthwhile.

“I think we tend to overlook or not realize the costs and resources that go into developing a replacement heifer,” Stegeman explains. “For example, you need to have enough pasture available, you have to keep a bull away from these heifers and raise them separate from the cowherd, and that takes additional resources.”

Here are seven additional factors Stegeman, other veterinarians and beef Extension specialists take into consideration as they work with cow/calf producers who are raising their own replacement heifers.

1. Monitor calves early. Stegeman advises his producers to start looking at their prospects during preweaning, managing nutrition proactively to prevent underfeeding or overfeeding.

“Everyone wants to pick a good-looking heifer, but you don’t want the heifer still on the mother cow to get too fat,” he says. “If we’re creep feeding, we want to watch our starch. If that heifer is too fat at weaning that in and of itself can be a setback.”

Heifer calves that are too fat have been shown to have reduced milking ability once mature, according to Oklahoma State University Extension research. Mammary development is in a critical stage from 2 months of age until about 9 months, or just before puberty.²If a calf is storing considerable amounts of extra fat during that time, excessive fat can be deposited in the mammary gland and inhibit its development.

Stegeman adds if the calf has too much body fat that has the potential to cover up physical defects, which might only be discovered after the producer decides to retain the calf.

In addition, Stegeman likes to talk with producers about nutrition and environmental factors the dam experienced while carrying the calf. He considers whether the mother cows were subjected to drought conditions or inadequate nutrition or other environmental factors.

“Fetal programming factors can result in potential negative productivity in the heifer calf following it through to maturity,” he tells Bovine Veterinarian.

2. Heifer calves born earliest are usually the top picks. Older heifers are more likely to reach the desired target weights by the start of breeding. Early puberty is moderately to highly heritable and positively related to future reproductive efficiency.

“Fertility is driven by genetics, so much so that it’s very important to pick those heifers born early in the calving season as replacements” Stegeman says.

During the selection process, producers with their veterinarian’s help, should look for heifers that are structurally sound, have a wider structural frame and a body type of more rib shape and depth, recommends Mark Z. Johnson, Oklahoma State University Extension beef cattle breeding specialist.³

Johnson adds that fleshing ease equates to breeding females that can better maintain body condition and energy reserves on a given amount of feed.

3. Consider genetic merit. Genetics are an important consideration, as producers plan the type of heifers they want to raise and keep and the traits needed to meet their goals.

“I think one of the problems with the beef industry today is that we’re choosing heifers from the steer pool of genetics – we’re choosing heifers out of carcass genetics,” he says. “There’s opportunity in the beef industry to have maternal herds producing genetically superior replacement females for cow/calf operations to purchase, which will be important going forward.”

4. Put prospective replacements on pasture, once they’re weaned. “We like to develop heifers on the pasture that they’re going to see as an adult cow,” Stegeman says. “They essentially program themselves, and after they calve the first time, they’ll perform better and stay in the herd. Don’t push them too hard with grain,” he cautions. “Go for the pound and a half to 2 pounds of gain per day.”

5. Don’t overlook the importance of temperament. A heifer can look like a great fit for the farm but still be an animal the producer needs to cull, because of her attitude and behavior.

Mississippi State Extension beef specialists encourage producers and their veterinarians to use a chute scoring method to keep temperament records.⁴ When heifers are restrained in the working chute, they can be assigned a score from 1 to 4 (1 = calm; 2 = restless shifting; 3 = squirming; 4 = twisting and rearing). Temperament is a very heritable trait, and removing temperamental heifers from the herd improves safety for farm employees as well as other members of the cowherd.

6. Protocols are needed for heifer vaccinations and deworming. For replacement heifers, Stegeman recommends administering a modified live viral vaccination and an initial leptospirosis vaccine at weaning time, when the animal is 6 to 7 months old.

“We’ll then deworm, often with a combination product, at that time as well,” he says.

Once heifers reach the 12-month mark, they are then administered a second round of vaccinations and dewormer.

“With some of the longer synchronization protocols now, we can give them their last pre-breeding vaccination the day we set them up, as it is approximately 33 days to breed from day one to AI or bull turn out,” Stegeman says. “Often, to save on number of trips through the chute, we try to consolidate processing.”

7. A pre-breeding examination is good insurance. Stegeman recommends that veterinarians reproductive tract score the heifers, either via ultrasound or manual palpation, at around 45 days prior to breeding. He says to measure the pelvis to make sure it is at least 150 square centimeters in size.

“We don’t want to set that number too high. We don’t want to say, ‘Well, my heifers need to be at 180 square centimeters,’ because then we’re just selecting for a big cow,” says Stegeman, citing research by David Patterson, PhD, emeritus beef Extension specialist at the University of Missouri.

With tract scores, Stegeman looks for scores of four and five, which indicate the heifer is ready to breed.

“We can start them on synchronization for breeding,” he says. “If needed, with some of the twos and threes, we’ll put them on feed to hopefully increase their tract score. Research indicates it takes at least 20 days to increase the tract score. If we have enough of the lower scoring heifers, and we deem it necessary, we can sort them out from the fours and fives to bump up their tract score using increased feed,” Stegeman adds.

He notes that the reproductive tract score along with the pelvic measurement provides the producer with some insurance that he is hanging on to the ‘right’ versus the ‘wrong’ heifers.

“The veterinarian can save producers money and time with these practices,” Stegeman says. “If you wait until preg check time to cull those heifers that’s not a good decision for the producer, because he’s got all the extra expense and feed into them up until that time. You might as well put them in the feedlot or develop them out for feeding earlier in the process,” he says.

¹DocTalk, Thomson, Dan. DocTalk Ep 462 - Heifer Development with Dr. Ray Stegeman

²Selk, Glenn. Development of Replacement Beef Heifers. http://agecon.okstate.edu/cattleman/files/ch_21_6th_ed.pdf

³Johnson, Mark Z. Selection of Replacement Heifers. https://extension.okstate.edu/programs/beef-extension/cow-calf-corner-the-newsletter-archives/2024/february-26-2024.html

⁴Rhinehart, Justin D. and Parish, Jane A. Replacement Beef Heifer Development. NRC, 2000. Adapted from NRC Nutrient Requirements of Beef Cattle, 7th revised edition. https://extension.msstate.edu/publications/publications/replacement-beef-heifer-development

More news from Bovine Veterinarian:
New World Screwworm: Latest Update from USDA-APHIS

U.S. Cattle Inventory Down 2%, Beef Cows Down 2%

Fri, 27 Sep 2024 18:23:12 GMT

U.S. Cattle Report

The U.S. cattle report shows all cattle and calves reported at 87.2 million head, 2% below the 88.8 million last year. The following is a breakdown of the report:

• Cattle and calves, 87.2 million head, down 2%.

• Cows and heifers that have calved, 37.6 million, down 2%.

• Beef cows, 28.2 million, down 2%.

• Dairy cows, 9.36 million, down slightly.

• Heifers 500 pounds and over, 18.5 million, down 1%.

• Beef replacement heifers, 4.86 million, down 1%

• Dairy replacement heifers, 4.06 million, down slightly.

• Other heifers, 9.57 million, down 2%.

• Steers 500 pounds and over, 15.8 million, down 2%.

• Bulls 500 pounds and over, 2.02 million, down slightly.

• Calves under 500 pounds, 13.3 million, down 3%.

• 2023 calf crop, 33.6 million, down 2% from 2022.

• Cattle on small grains pasture in Kansas, Oklahoma and Texas, 1.59 million, down 2%.

Cattle and calves on feed for the slaughter market in the United States for all feedlots totaled 14.4 million head on Jan. 1, 2024. The inventory is up 2% from the Jan. 1, 2023, total of 14.2 million head. Cattle on feed in feedlots with capacity of 1,000 or more head accounted for 82.7% of the total cattle on feed on Jan. 1, 2024, up slightly from the previous year. The combined total of calves under 500 pounds and other heifers and steers over 500 pounds (outside of feedlots) is 24.2 million head. This is 4% below Jan. 1, 2023. View the full report here .

Increasing the Resilience of the Beef Cattle Supply: Impact of Drought on Cattle Numbers

Thu, 12 Sep 2024 15:42:18 GMT

It seems like the climate cycles have turned against us, says Paul Beck, Oklahoma State University State Beef Cattle Nutrition Specialist in his report of how drought affects cattle numbers. Figure 1 shows the NOAA extremes in Palmer Drought Severity Index (PDSI) from 1910 to 2023.

NOAA extremes in Palmer Drought Severity Index (PDSI) from 1910 to 2023.

(NOAA)

“Since the early 2000s droughts have become more frequent and more severe than any time since the 1950s,” he says. “In the era from the late 1960s to the early 2000s, we had been in a long-term wet cycle, one that appears to be abnormal compared to our historical climate since 1910. The environmental conditions from 1970 to 2000 is the only thing many of us ever knew. This 30-year span also corresponds to the evolution of our modern beef cattle production system. Leading to the question, would the production practices we developed from 1970 to 2000 be sustainable in the 50s and 60s?”

If we are returning to that weather pattern, the question is then, will they be sustainable in the future?

Along with the increasing severity and frequency of droughts, other weather-related events have become more common and more costly. Extremes in heat during the summer and winter storms in the winter, 1,000-year floods, out of control fires, and other disasters have become more frequent impacting human life and agricultural productivity, Beck adds.

Cattle calving as shown super imposed over the drought duration.

(Paul Beck)

Droughts impact cattle numbers and drive the timing of the expansions and contractions of the cattle cycle. Below the numbers of beef cows and heifers that have calved (black line) is super imposed on the drought duration (gray bars) in each year. Widespread drought in 2011 through 2013 resulted in a 2.5% decrease in beef cattle herd size, resulting in record high prices stemming from the low cattle numbers. This gave the impetus for a nearly 3.5% increase in the beef cattle herd by 2018 when conditions returned to normal. Then in 2021, a return of drought conditions, yet again resulted in a 2.5% decrease in the beef cattle herd through 2023.

Assording to Beck’s report, the USDA estimates there is currently 17.1 million head one-time capacity in feedlots, so based on 1.9 turns per year in the feedlot (current average is 192 days on feed), 80% occupancy rates, normal heifer retention of 3.5 million head per year, normal imports of feeder calves from Mexico (1 million head) and Canada (150,000 head), and 77% weaning rate (based on 81.4% calving rate and 95% calf survival rate), we need 32.3 million beef cows to supply the feedlots each year. We almost reached that in 2019 (31.8 million beef cows) but the U.S. beef cow herd is currently at 28.2 million head.

“The shortage of feeder cattle will result in changes in production practices (longer days on feed, reduced weights of feeders entering the feedlot, etc) and increased bids for feeder cattle, but there are other implications of drought,” Beck says.

Ag Economist Talks Trends To Watch In The Livestock Industry

Thu, 25 Jul 2024 18:46:20 GMT

After a tough couple of years in the livestock industry, Scott Brown, an ag economics professor at the University of Missouri, says there may be a light at the end of the tunnel. He recently joined the Top Producer podcast to share what he believes is on the horizon for beef, dairy and pork producers.

Rebuilding In Beef
Brown shares the current state of the beef industry began forming in 2020. And after three years of drought in cattle country, as well as significant liquidation, there’s a supply shortage.

“I think it’s taken us longer than maybe we typically would have thought to get some rebuilding to happen,” Brown says. “You add on top of that costs have just continued to go higher, so the prices we need for cattle to generate the interest to grow herds are very different today than just a few years ago. A lot of that’s at play.”

He expects to hit 2026 before there is significant growth in the country’s beef cattle herd.

“At some point, there will be enough profitability to get more beef cows back in the herd,” Brown says. “I think the operations will also continue to get bigger on the cow/calf side.”

Improvement In Pork
Coming off of a year Brown likens to 1998 for pork producers, he says the financial side is showing signs of improvement.

“By April, we were starting to see hogs that might have been in the black again for the first time in several months,” Brown says. “There’s still a lot of them that have probably a reasonably deep financial hole to climb back out of given how tough 2023 was, but it’s good to see some positive news on the pork side.”

He adds productivity has been phenomenal and anticipates international demand to play a large role in the future.

“Even though we’ve been losing sow inventories in the country, productivity has more than offset some of that and suppliers continue to run fairly high,” Brown says. “The pork industry generally has been really good about getting international demand to grow in some new places. Central America, Mexico and now some smaller Central American countries are now taking some pork from us. That’s a great longer term move for the pork industry.”

Expanding Demand In Dairy
Like the pork industry, Brown says dairy experienced a tough 2023 due to low prices.

“Dairy markets are the most demand inelastic markets we have in agriculture. But when supplies out strip that demand just a little bit, we can get some fairly low prices. I think that happened in 2023,” he says. “Cheese has been one of the most important demand-side factors. How do we continue to expand that side?”

Looking ahead, Brown says prices have improved in dairy and at the same time, lower prices for corn and soybeans are helping producers as well.

Hear more on the Top Producer podcast .

America’s Top 33 Beef Cow Counties

Fri, 12 Apr 2024 22:21:07 GMT

(Farm Journal)

Cherry County, Neb., is America’s top beef cow county with 184,716 cows, more than twice the number as the county with the second most, Holt County, also in Nebraska. A third Nebraska county, Lincoln, lands in the sixth spot of the Top 33 beef cow counties with 75,582 cows. Statewide, Nebraska ranks as the nation’s fourth in terms of total beef cows. Our list of the Top 33 beef cow counties has a total of 20,054 producers with 2,163,017 cows, for an average herd size of 108 head. Together these 33 counties account for 7% of the nation’s 29.4 million beef cows and 3% of beef operations. The state with the most beef cows, Texas, lands five counties in the Top 33 beef cow counties, but only one in the top 10, Lavaca. The second largest beef cow state, Oklahoma, has three counties in the Top 33, but only one in the top 10, Osage.

Why 33 Counties?

This list of counties could have stopped at 25, but that would have ignored several counties with large cow numbers that fall just outside the 25th spot. Indeed, a total of 19 counties have between 50,000 and 60,000 beef cows, so the cutoff to make this list became 50,000 cows. South Dakota, the state with the fifth most beef cows, landed seven counties on the list of 33, with Meade the largest with 81,773 beef cows.

In addition to Nebraska and Oklahoma, three other states have three counties in our Top 33 – Florida, Montana and Missouri.

Three states that rank in the top 10 nationally for beef cow numbers according to the Jan. 1, 2024, Inventory report, do not have a single county in the Top 33 – Kansas, North Dakota and Kentucky.

Note: Tulare County, California, ranked in the top 10 counties in the 2017 Census, but dropped out of the top 25 counties with a 52% herd decline from 72,778 beef cows in 2017 to 34,580 beef cows in 2022. The number of operations declined from 389 to 359 (-8%).

You Ain't Seen Nothing Yet: Why Economists Say Cattle Prices Will Soar Even Higher This Year

Mon, 05 Feb 2024 17:03:12 GMT

There’s no doubt the U.S. cattle inventory continues to shrink . The latest numbers from USDA out this week showed the U.S. cattle inventory dropped 2% year-over-year with 87.2 million head of cattle and calves on U.S. farms as of Jan. 1, 2024.

(Farm Journal)

Other key figures from the report showed:

Of the 87.2 million head inventory, all cows and heifers that have calved totaled 37.6 million.
There are 28.2 million beef cows in the United States as of Jan. 1, 2024, down 2% from last year.
The number of milk cows in the United States decreased slightly to 9.36 million.
U.S. calf crop was estimated at 33.6 million head, down 2% from 2022.

“Not really a lot in the way of surprises in this report, it was pretty well anticipated,” says Derrell Peel, Extension Specialist for Livestock Marketing with Oklahoma State University. “I think the take home message here is pretty powerful in that this industry continues to get smaller. We got smaller through 2023. So we’re coming into 2024 with smaller cattle inventories pretty much across the board.”

(Farm Journal)

Peel points out with the U.S. beef cow herd the smallest since 1961 and the all cattle inventory the lowest since 1951, it’s setting the market up for more strength in cattle prices.

“We have gotten smaller than we intended to be smaller than we need to be from a market standpoint,” says Peel. “And I think that’s going to be where we jump off to think about where we go from here.”

Nevil Speer of Turkey Track Consulting says not only did the latest report shows signs of further contraction, there currently aren’t any signals showing the rebuilding of the U.S. cattle herd has started to take place.

“40% of the on feed population is heifers last quarter. So, there’s no indication that we’re ready to dig back in and start rebuilding,” says Speer.

So, could the U.S. cattle market see higher highs? Dave Delaney of Ever.Ag says it’s a bit of a loaded question, but volatility will continue to take place.

“Short-term, I think as we look at the fat cattle market, we’re on a plane of steady to maybe a softer undertone for a short period of time, but I do believe we are going to go higher in the fat cattle market, as well as the feeder cattle market.”

“We’re nowhere near done with this thing,” says Peel “We had a tremendous runup in prices in 2023. And you can look at the setup last year, and I know some producers are thinking, ‘Okay, we’ve got our run up that we’re close to the top.’ And we’re comparing a lot to 2014 and 2015, which were the last highs, but those high prices in 2014 and 15 happened a year to a year and a half into herd expansion.”

Peel says the highs of the market will be in once the industry starts to retain more heifers and the rebuilding process has taken place.

“That’s what puts the highs in the cattle market. So, we haven’t started that process yet. That’s all ahead of us,” says Peel.

Several Reasons for Slow Herd Expansion

Mon, 07 Aug 2023 20:04:41 GMT

The mid-year cattle inventory report confirmed cattle numbers continue to get smaller and there is no significant indication of herd rebuilding so far. Despite sharply higher cattle prices this year, there is no data to suggest heifer retention or enough decrease in beef cow slaughter to initiate herd expansion, although the most recent weekly slaughter data are encouraging. The process thus far is considerably slower than the herd expansion after the drought in 2011-2013 pushed cattle inventories to a cyclical low in 2014. There are several reasons why producers are moving more slowly and cautiously thus far.

Continuing Drought is still an issue in significant regions of cattle country. While drought is not likely causing a great deal of additional herd liquidation from a broader market perspective, it surely is preventing herd expansion in those drought-stricken areas.

Drought Recovery - Pastures and ranges in locations recently emerged from drought need time to heal after 2-3 years of drought damage and stress. Hay supplies are depleted and must be replenished. Many regions are still vulnerable to redeveloping drought and there is uncertainty that forage production may remain restricted.

Financial Recovery - Many cattle operations have suffered from considerable financial stress from drought and high input costs. The short run need to realize immediate returns from higher cattle prices may be causing continued heifer and cull cow sales for now.

Input Cost Uncertainty - High, and in many cases record high, input prices were a particular challenge in 2022. Record hay prices and elevated supplemental feed costs have had a huge impact in drought regions. Record or near-record high fertilizer, chemical and fuel costs have been a significant challenge for producers, especially in regions of introduced pastures. Though some input prices have moderated in 2023, input price uncertainty has producers reacting cautiously to higher cattle prices.

Interest Rates - Not only are inputs costs higher but sharply higher interest rates creates a different economic climate that may temper the pace of herd expansion compared to the 2014-2019 period. Higher finance costs will be a much more significant factor as breeding heifer and cow costs rise in the coming months.

Producer Expectations - All of the above factors contribute to the economic backdrop of the industry and become part of the producer expectations that are the key to herd rebuilding. Until enough cow-calf producers anticipate enough returns for a long enough period of time, herd expansion will be tempered. In the meantime, cattle supplies will continue to tighten. Market prices for calves and feeder cattle will continue to increase as the market provides more price incentives that will eventually strengthen producer expectations and jump-start herd expansion. That process is likely to begin in earnest in the remainder of 2023 and into 2024.

Ag Economists Cast Doubt On Just How Much of a Reduction the U.S. Cattle Herd Has Seen in a Year

Fri, 21 Jul 2023 00:34:04 GMT

January’s cattle inventory report showed the smallest beef cow herd since 1962. As USDA prepares to release an updated look at beef cattle inventory this week, a survey of ag economists shows the possibility of only a small reduction year-over-year. If the forecast holds true, it could put a damper on forecasts for even higher cattle prices.

The July Ag Economists’ Monthly Monitor , which is a survey of nearly 60 ag economists from across the country, shows an average July 1 beef cattle inventory estimate of 30.1 million head. That’s slightly higher than what the same economists projected in June, which was 30 million head, but it’s not far from the 30.3 million head USDA reported last year.

“The Ag Economists’ Monthly Monitor for July pegs the beef cow herd at 99% of one year ago. That is a smaller decline in beef cow inventory than many of the pre-report estimates being discussed that are generally below 98% of a year ago,” says Scott Brown, a livestock economist with the University of Missouri and one of the authors of the Ag Economists’ Monthly Monitor. “The range of survey results is wide which may indicate the differences drought has played in different parts of the U.S.”

In January, USDA’s inventory report showed 28.9 million beef cows in the United States as of Jan. 1, 2023, down 4% from last year. The number of milk cows in the United States increased to 9.40 million.

If the results of the July Ag Economists’ Monthly Monitor are any indication of what USDA may reveal in its July report, Brown says it could have an impact on cattle prices.

“If the survey results are correct, it could spell lower prices in the months ahead relative to current expectations,” says Brown.

(Farm Journal)

The July Ag Economists’ Monthly Monitor also shows economists are more positive when asked about cattle and hog prices, but they have a more negative view on dairy, which they consider the biggest weight in the livestock sector.

“When you look at where pork prices have gone over the last month, it’s gotten more positive. Now, I don’t want to suggest we’re back in black ink, but we have seen recovery in things like the pork cutout value,” Brown says. “The economists continue to worry about how the general economy will affect livestock going forward, but overall, it seems we’re seeing a more positive view from the livestock perspective in this month’s survey.”

The survey also shows economists think feed prices will be the biggest weight on livestock prices, but they do think USDA is too low on their average livestock price forecast for the year.

The average fed cattle price estimate in the July survey was $176 per hundred weight on fed cattle, 70 cents higher than USDA’s 2023 forecast. And economists think the average hog price will reach $59.90 per hundred weight this year, $2 above USDA’s current forecast.

What to Watch Over Next 6 Months

While most economists think cattle prices will continue to trend higher, they were also asked what factors they view as the biggest driver of livestock prices in the next six months. The responses varied in the July survey, but highlights include:

• “Domestic and international demand growth slowing.”
• “For fed cattle, continued good consumer beef demand will be most important. On the feeder side, corn prices will be the most important determinant of higher or lower prices even though they will remain well above a year ago.”
• “Placements of cattle on feed will be a major driving factor because it will determine the number of replacements being kept on pasture rather than being placed on feed. This has the potential to end the contraction phase of the cattle for 2024/2025 where cattle inventory may begin to grow again.”
• “The main factor affecting livestock prices will be macroeconomic factors influencing consumer demand for meat. Consumer sentiment and consumer spending appear to be weakening based on recent anecdotal evidence.”

(Farm Journal)

Economists were also asked to share what they currently view as the most positive aspect of agriculture, including crops and livestock, one economist said, “Cattle markets are going to be extremely high in the coming year.” Another economist mentioned demand, saying, “The strength of U.S. meat exports is a real bright spot and is looking to continue to be positive going forward.”

Read the full results from the July Ag Economists’ Monthly Monitor .

Will Cattle Prices Smash New Records This Year, Topping 2014?

Sat, 04 Feb 2023 17:30:41 GMT

After four years of liquidation, the U.S. cattle herd continues to contract . With drought still a driving force behind lower cattle numbers, market experts think cattle price could top previous price records set back in 2014.

According to the semi-annual cattle inventory report , total beef cow inventory numbers were down 4% year-over-year, coming in at 28.9 million head. According to Drovers, the total beef cows reached the lowest point in inventory in over 50 years.

According to Don Close, chief research and analytics officer for Terrain , the inventory report revealed even tighter supplies than what the market expected.

“I think we’ve been a little bit misled because of the cattle on feed numbers still at 100%,” says Close. “But if you look at the numbers behind that, and what’s available for replacement cattle, as we go through 2023, I think that supply is going to contract at a substantially faster rate than what we’ve been expecting.”

The Gas Tank is Empty

Close expected the inventory report this week to show some heifer retention taking places in areas like the Dakotas, Montana and the Southeast. The report revealed the opposite, which means the stronger cattle prices could be a trend longer-term.

“The report to me, it just shows the gas tank empty, and all classes of cattle,” says Close. “And so I’d say the biggest surprise for me going into that record is there’s been absolutely zero heifer retention to this time. And I agree with Derrell, we don’t have the green light to move forward yet.

It’ll Take Longer to Rebuild This Time

With heifer retention low, it paints the picture of a smaller calf crop. Peel says that’s another reason he thinks the rebuilding of the U.S. cattle herd will take longer than a decade ago .

“It’s going to take longer to rebuild this time, because I do think the gas tank is empty,” says Close. “It’s going to take longer to develop heifers for breeding. And when you look at the biologics of the way the cattle industry works, it’s going to take longer than it did the last time, certainly in terms of our ability to rebuild the herd and get beef production back up once it comes down here, going forward.”

Read More: Will Volatility and Uncertainty Delay the Next Cattle Cycle?

The U.S. saw extreme drought impact the cattle herd, leading to tighter supplies in the foreseeable future, with rebuilding likely to have a longer tail than the last time and the price forecasts remaining bullish. But now it’s a question of if prices can top the highs set back in 2014, and Close thinks cattle prices will hit new highs.

“I don’t think there’s any question about it,” says Close. “If we look at the low 170 level on fed cattle that we saw at the peak of the 2014/2015 market, I think before this one’s done, we will go through those old historical highs with gusto. And to support that, I still think we’re working with a very solid demand base under the market, which is only going to exacerbate this whole situation.”

Higher Highs for Prices?

Peel thinks cattle prices will continue to trend higher, but when could prices peak? Peel says that depends on a few different factors, but he’s watching either the end of this year or early next year before prices find the top.

“The real spike in prices will come when we do start that rebuilding process and we do start retaining heifers,” says Peel. “That’s what squeezes slaughter in the short run, and we’re not sure when that’s going to happen. It still depends on the drought, but it could certainly start this year. It’s either late 2023 or into 2024 when we get that real spike in prices, and Don’s absolutely right with there’s no doubt we will see record prices for both feeder cattle and live cattle.”

AgDay TV Markets Now: Kevin Good of CattleFAX Has a Bullish Cattle Price Outlook for 2023

Will Volatility and Uncertainty Delay the Next Cattle Cycle?

July Cattle on Feed and Cattle Inventory Reports: Here’s What to Expect

Fri, 22 Jul 2022 13:51:57 GMT

With the Cattle on Feed report and Cattle inventory report set to be released today, what numbers can we expect to see?

Kevin Coburn, senior economist focused on agriculture for the S&P Global Commodity Insights, joined “AgriTalk” to discuss what he expects in today’s reports.

Considering the cattle on feed numbers, “over the past few months, we’ve had some lower placement numbers behind year-ago levels and that’s really transitioning us from those record numbers we had late winter to early spring to pretty close to year-ago levels right now. And as is the case with most of these cattle on feed reports, the placement numbers are going to be the ones to watch as the market continues to balance out what the drought movement is of cattle and these tighter cattle supplies,” Coburn explains.

Feedlot inventories have been trending at record high levels the past couple of quarters, and Coburn does not expect anything different as the movement off pastures from drought has continued. Additionally, heifers in feedlots will likely remain high, which lends to a longer-term cycle in the beef herd.

“We need to stop that if we are going to rebuild the commercial beef herd out there at some point. We need to pull the females out of the feedlot and put them out on pasture and get them ready to have calves,” Coburn says.

As the numbers in cattle on feed likely remain high, Coburn expects the fed cattle prices to reach highs later this year and into 2023.

Slaughter numbers continue at a high rate, and Coburn describes the drought and subdued margins at the cow-calf level as major factors in the herd numbers.

“I’ve got total all cattle and calves down 2 million head from last year. That’s going to feature a beef cow number, I think down 900,000 head from last year. And once you account for the steer and heifer supply, I think it’s going to give us an implied feeder cattle supply number of 1.1 million head below last year, and that would actually be the tightest feeder cattle supply since 2014,” Coburn estimates.

Cattle prices generally should be supported the rest of the year and into next year, but feed costs will continue to be a limiting factor. Even with a recent correction in feeder cattle prices and new crop corn prices making their way lower, historically, feed costs remain high.

When it comes to rebuilding the cattle herd, “the cost is the constraint right now, and that’s really no secret to anybody,” Coburn notes.

High fuel costs and the high prices of hay are continuing to offset any potential gains a rancher gets on increases in cattle prices.

Coburn expects the contraction in the cow herd to continue into next year, which would place the cycle high in late 2023 to early 2024.

The Cattle inventory report and Cattle on Feed reports will be released at 3:00 p.m. CST on July 22 and will be found here .

Counting Cows: Drought, Costs Will Drive Further Reductions

Wed, 27 Apr 2022 13:52:33 GMT

Drought has already baked in a significant impact for the cattle industry. While the calendar still says spring and rains that will produce adequate forage conditions for the 2022 grazing season might come, liquidation has already put the industry on track to reduce the nation’s cowherd back near 2014 levels, which was the smallest beef cowherd since 1952.

The USDA’s annual cattle inventory report found 30.13 million beef cows on Jan. 1, 2022, a decline of 2.3% from the previous year. Industry economists believe that inventory could contract another quarter or half a percent by Jan. 1, 2023.

This year’s cow inventory is just 1.04 million head more than the 2014 drought-induced low of 29.09 million. Economists see a combination of factors, including drought, that could continue to reduce the current cow inventory.

“The numbers don’t suggest that we could expand this year, or even if we would want to given the increased costs for cow-calf producers,” says Derrell Peel, Oklahoma State University economist.

Widespread Culling

The U.S. Drought Monitor in late March put more than 61% of the contiguous U.S. in some classification of drought, the largest portion of the country in a state of drought since September 2012. Comparing the drought monitor to a map of beef cow inventories, roughly 80% of the nation’s herd is in some category of distress.

That’s evident in cow slaughter the first 10 weeks of this year that averaged 75,000 head per week, an increase of more than 10,000 head per week over the same period last year.

The map highlights 12 states in the center of the nation that account for 18.8 million beef cows, or 62.4% of the U.S. total. Among the 12, all but Iowa saw a reduction in beef cow inventory last year. As a whole,the U.S. beef cowherd declined by 719,000 head last year, and the dozen states highlighted here accounted for 92% of that decline(661,000 head net loss).

Even without the drought last year, Kansas State University economist Glynn Tonsor says beef producers would likely have reduced their herds some.

“I think we would have shrunk the herd a little even without the drought magnifier, simply because of the price signals ranchers were seeing,” Tonsor says.

The looming question going forward is if the beef cowherd will be reduced back to a level similar to 2014, which was 29.08 million head. The size of the herd then reduced available feeder cattle supplies and led to record prices for both feeder cattle and fed cattle.

“Over a six-year period from 2009 to 2014 we reduced the beef cowherd by about 3.5 million head, some of which was caused by drought and some of which was caused by economics,” Tonsor explains. “Is it possible we’ll take another million cows out of the inventory? Absolutely it’s possible, and I believe it’s at least a 50/50 chance that it will happen in the next two years. But it will be because of a combination of drought and increased costs that are not directly part of drought.”

Rising costs for fuel, grain and other inputs are expected to add $75 to the cost of producing a calf this year, according to USDA estimates. Other factors might also play a role in declining cow numbers, as shown by the 4.7% decline in Missouri.

“Missouri declined 94,000 beef cows, and we didn’t have the drought conditions experienced by other states,” says Scott Brown, University of Missouri economist. “That’s the third-largest decline in inventory of all the states. I can only explain that large of a decline with the assumption that soybeans are too attractive.”

Brown believes rising values for soybeans encouraged producers to convert pastures to row crops in some parts of the state, and a similar scenario could play out again this year.

“Grain prices are higher and cow costs are higher, too. So the incentive is there for Missouri producers to make that swap again,” Brown says. “And once you plow that pasture it doesn’t go back to pasture very often.”

Impact on Prices

If drought produces a silver lining, it’s the inevitable higher cattle prices from herd reductions.

“Significant drought this year will have more noticeable impacts on cow markets, will change the timing of feeder cattle and ultimately feedlot production, and will have more implications for the industry in subsequent years,” Peel says. “There is potential for the drought to push cattle inventories significantly lower than planned and set up a market reaction similar to 2014/15 in the next couple of years.”

The effect of smaller feeder cattle inventories is already pushing prices higher and could provide some needed financial relief this fall.

“Ranchers who have calves hitting the ground this spring will sell them this fall in the realm of $2,” Tonsor predicts. “That’s my current best guess. If we pull another million cows out of the herd, and if demand holds, I think we have the possibility of $2.50 per cwt calves in two years.”

Should liquidation take the cow herd back to 2014 inventory levels, the scenario won’t be a mirror image of 2014. That’s because the industry has changed in some important ways.

“We are more productive than we were in 2014,” Brown explains. “Slaughter won’t go back to 2014 levels, which was about 115,000 head per day. I project that daily slaughter average will be closer to 125,000 head per day in 2024, which is about 10,000 head per day less than what we saw in 2021.”

The growing use of beef-on-dairy will also affect the feeder cattle supply to some degree over the next few years and could minimize the impact of the smaller beef cow inventory.

Good News: Consumers Continue To Choose Beef

Editor’s Note: This article is part of the Drovers 2024 State of the Beef Industry report, which includes an exclusive survey of cattle producers and their thoughts on numerous topics of importance to the future of their operations. To download the full report, click here .

The dominating theme in 2023’s State of the Beef Industry report was weather. While parts of the U.S. still grapple with dry conditions, the overall situation has dramatically improved versus this time last year, especially in the middle part of the country.

The reprieve has provided producers some opportunity to focus on other parts of the business. The topic that’s foremost of significance is the market — record prices have a way of doing that. Supplies are increasingly tight, but much of the market’s strength is attributed to resilient beef demand. Last year’s per capita beef spending totaled $461 — a new record by $14.

All-Fresh Beef Retail Price

(Farm Journal)

That’s especially encouraging given consumers’ No. 1 complaint about inflation involves food prices. The business is such that consumers have had every opportunity to trade down when it comes to their protein options, but they continue to choose beef, even at higher prices.

Those consumer dollars are flowing back into the production sector. As a result, fed cattle prices have established another set of new highs in 2024. While overall beef production has waned (due to lower cow slaughter), fed beef production has been running ahead of year-ago levels. That is, higher prices on bigger volume.

All of that is a testament to the importance of building, and maintaining, efforts to boost beef demand. The industry’s success toward improved quality and consistency, coupled with meaningful promotion, is paying dividends for U.S. producers.

Battle for Margin

Nevertheless, while fed beef supply has held steady, it’s likely that trend will be pressured in coming years. Beef cow inventory started the year at 28.2 million head. The Jan. 1 feeder cattle supply outside of feedyards was just 24.2 million head, down 5% from 2023 and off 10% from the recent peak of 26.6 million head in 2017.

Beef Cow Inventory

(Farm Journal)

Feeder Cattle Supply Outside Feedlots

(Farm Journal)

Therefore, numbers will remain tight in the coming years, and they will be further exacerbated if/when producers decide to hold back heifers to rebuild the cowherd. At that point, the industry is likely to see the peak in prices.

Just how high can prices go? That remains to be seen, but the battle for margin between the feedyard and the packer, and ultimately the retail and food service sectors, will be especially important to watch. In the interim, the cow-calf producer holds the cards and will continue to benefit from solid prices allowing the sector to string together multiple years of unprecedented profits.

Beef On Dairy

Last, but not least, the beef-on-dairy trend continues to influence the industry, proving to be an important contributor to the beef sector. In light of waning beef numbers, these calves will make up a larger share of fed beef in the next several years (as dairy cow numbers remain relatively steady). As a result, many feedyards are working to improve the quality and consistency of their beef-on-dairy supply chains. All of that means increased feedback to suppliers as the calves are easily traceable. Much of that influence will likely creep into the native supply chains.

Dairy Cow Inventory

(Farm Journal)

A Glimpse Into the Cattle Inventory Black Hole

Drovers State of the Beef Industry 2024 Report

(Source: USDA; CattleFax Estimates)

Cows and Heifers

Beef cow inventories are estimated to be 400,000 below a year ago. Beef cow slaughter has been down sharply but not enough to overcome the record-low bred heifer inventory as of Jan. 1, 2024, most of which have now calved and would be counted as cows.

Beef replacement heifer inventories are likely steady to slightly higher but remain historically tight, estimated up a narrow 50,000 head from last year. Spring 2023-born heifers were likely retained and bred at a stabilization pace, with numbers roughly even with year-ago. A few more heifers might have been retained from the fall 2023 calf crop, although this is a smaller percentage of the nation’s herd. The expectation is for a mild expansion pace of heifer retention this fall.

Dairy Cows

Dairy cow inventories are also likely steady to slightly smaller, estimated 50,000 head lower due to a shortage of replacements coming into the year, despite a steep decline in dairy cow slaughter. The dairy replacement heifer shortage, largely due to the beef-on-dairy revolution, will remain a headwind to stabilization and growth of the herd in the near term.

Calves and Feeders

The July report also contained the first estimate of the current year’s calf crop. CattleFax expects the 2024 calf crop to be 700,000 fewer head, a record low, reflecting a smaller breeding herd coming into the year. The smaller calf crop will continue to translate into tighter feeder cattle and fed cattle supplies down the road.

With total on-feed numbers up 100,000 head from year-ago, the feeder cattle and calf supply remaining outside of feedyards would be down 850,000 head or 2.5% from last year, also record small. The July 1 outside supply figure would include the new spring-born calf crop as well as the remaining 2023-born feeder cattle and calves.

Bottom Line

Despite the absence of the July Cattle Inventory report, CattleFax estimates, based on numerous other data sets, cattle inventories will continue to tighten, but with mixed signs of stabilization. Expansion and retention patterns will be closely monitored this fall with confirmation in January 2025’s inventory report.

Reprinted with permission from CattleFax.

Your Next Read: Good News: Consumers Continue To Choose Beef

The Future of the Beef Industry: New Survey Data Shows Producers Are Optimistic

Editor’s Note: This article is part of the Drovers 2024 State of the Beef Industry report, which includes an exclusive survey of cattle producers and their thoughts on numerous topics of importance to the future of their operations. To download the full report, click here .

Based on the 2024 State of the Beef Industry survey results, most respondents are simultaneously serious, thoughtful and optimistic about the business.

While parts of the U.S. still grapple with dry conditions, the overall situation has dramatically improved versus this time last year, especially in the middle part of the country. The reprieve from drought coupled with record prices has provided producers an opportunity to focus on other parts of the business.

Supplies are increasingly tight, but much of the market’s strength is attributed to resilient beef demand . Last year’s per capita beef spending totaled $461 — a new record by $14.

Consumers have had every opportunity to trade down when it comes to their protein options, but they continue to choose beef, even at higher prices.

Those consumer dollars are flowing back into the production sector. As a result, fed cattle prices have established another set of new highs in 2024. While overall beef production has waned (due to lower cow slaughter), fed beef production has been running ahead of year-ago levels. That is, higher prices on bigger volume.

Just how high can prices go? That remains to be seen, but the battle for margin between the feedyard and the packer, and ultimately the retail and food service sectors, will be especially important to watch. In the interim, the cow-calf producer holds the cards and will continue to benefit from solid prices allowing the sector to string together multiple years of unprecedented profits. In fact, in the past five years, 49% of respondents report profitability.

Looking to the Future

Producers are thinking to the future with plans to add a family member. In the 2024 Drovers State of the Beef Industry survey, 59% indicate they plan to add a family member to the operation in the next five years. That number was 54% in 2023.

The question that often follows next when adding a family member is herd size. Even though it doesn’t appear the industry will see rapid rebuilding, 51% of producers say they will grow herd size in the next five years. Of the remaining respondents, 38% plan to maintain herd size, 7% will reduce herd numbers and 4% aren’t sure.

While U.S. beef cow inventories stabilize in 2024, Lance Zimmerman, senior vice president, senior animal protein analyst for RaboResearch Food & Agribusiness, says the industry could experience a longer transition period as unprecedented risk mutes profit signals that normally kick-start herd rebuilding efforts.

USDA reported a Jan. 1 beef cow inventory of 28.2 million head, and Rabobank is forecasting a relatively stable cow herd over the next three years between 27.9 and 28.3 million. Cow-calf producers remain relatively quiet about the prospects of restocking pastures. That stands in contrast to the continuous dialogue regarding the production and price risks casting doubts on the segment.

Therefore, numbers will remain tight in the coming years, and they will be further exacerbated if/when producers decide to hold back heifers to rebuild the cowherd. At that point, the industry is likely to see the peak in prices.

For now, there are indications many operations are viable, which is likely why 64% of producers say they are optimistic about the future. In the 2023 survey, that number was similar at 65%.

Breakdown of Survey Respondents

Given this is the second consecutive Drover’s State of the Beef Industry survey, of special interest is the comparison of this year’s results versus last year. That begins with the demographics. Some of the similarities are striking.

For example, 2023’s survey resulted in 40% of respondents managing operations in which three-quarters or more of the business income is derived from cattle; that number was nearly identical this year (36%). Similarly, the 2023 survey indicated 82% of respondents preconditioned their calves before selling, and this year’s number came in at 79%.

Therefore, many of the key year-over-year comparisons are especially meaningful and begin to tell some sort of story in terms of trend (versus one-offs) about what’s really going on in the industry.

Drovers State of the Beef Industry

(Farm Journal)

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Are Cattle Producers Rebuilding Their Herds Now?

Editor’s Note: This article is part of the Drovers 2024 State of the Beef Industry report, which includes an exclusive survey of cattle producers and their thoughts on numerous topics of importance to the future of their operations. To download the full report, click here .

America’s beef cattle inventory continues to tighten, pushing market prices to record levels. Under normal conditions, that would lead to anticipation about building herds again. If this were a typical cattle cycle, the elements for expansion — ample forage and record-high cattle prices — would be in place. However, the current cattle cycle is not typical other than the recent liquidation when drought forced significant culling and resulted in the smallest U.S. cattle herd inventory in 70 years.

The pace of expansion or herd rebuilding in the current cattle cycle will be much slower than past cycles, and the extent of herd building will also be reduced. That has been the case for previous beef inventory expansions since 1975’s peak of 132 million head as subsequent cycles have all peaked below the previous cyclical peak. For instance, the 1982 peak was 115 million head, 1996 at 104 million, 2007 at 97 million and 2019 at 95 million. What has changed?

Production-wise, efficiency has increased and the industry produces significantly more beef with fewer cattle, which impacts prices. When expansion begins, smaller increases in inventory pull prices lower. But there are other crucial factors that influence individual ranchers’ plans to continue in the cattle business.

Volatility Will Increase

The age of farmers and ranchers is critical as decisions are made going forward. Closely tied to age is the financial stress of the market over the previous four years. This plays a greater role for part-time cattle producers. The drought coupled with low prices and accelerating costs of production are key to the decision. I often hear ranchers comment: “Why would I or my spouse continue working in town to support cows that are draining our bank account?”

For many of those part-time cattle producers, the cows went to the sale yard. Will they be replaced? Only time will tell, but many will not return to the business. The other major consideration of this cycle is the price of replacement cows or heifers.

Ranchers are rightfully wary of a market that could become increasingly volatile. It’s a major risk to invest in cows or breed heifers with high maintenance costs that won’t deliver a marketable product for two-plus years.

The decision to own cattle or expand an existing herd will be influenced by high interest rates and rising production costs, further slowing the speed of any herd rebuilding.

Rebuilding The Cowherd Remains On Hold

One of the biggest factors on everyone’s mind revolves around if and when cow-calf producers might begin rebuilding the cowherd. Much of that decision to date has been contingent on the weather. However, despite improving forage availability and conditions (and higher prices), producers remain tepid about running more cows.

Drovers State of the Beef Industry 2024 Report

(Farm Journal)

The 2024 Drovers State of the Beef Industry survey asked, “What are your plans to restock your cowherd (as a result of the drought)?”

In both 2023 and 2024, 21% of respondents indicated “next year.” The process remains on hold. However, some of that reluctance might prove to be permanent. One key difference in this year’s survey has more producers indicating they have “no plans to restock” (23% versus 14% in 2024 and 2023, respectively).

There’s not much appetite to aggressively rebuild the cowherd. Producers are cautious when it comes to running more cows.

Drovers State of the Beef Industry 2024 Report

(Farm Journal)

Your Next Read: A Glimpse Into the Cattle Inventory Black Hole

How Historical Cattle Cycles Are Shaping Inventory and Production Today

Editor’s Note: This article is part of the Drovers 2024 State of the Beef Industry report, which includes an exclusive survey of cattle producers and their thoughts on numerous topics of importance to the future of their operations. To download the full report, click here .

By Lance Zimmerman, senior vice president, senior animal protein analyst for RaboResearch Food & Agribusiness

Past cattle cycles provide an outline for the tendencies that typically shape inventory and production over years and decades. While U.S. beef cow inventories stabilize in 2024, the industry could experience a longer transition period as unprecedented risk mutes profit signals that normally kick-start herd rebuilding efforts.

USDA reported a Jan. 1 beef cow inventory of 28.2 million head, and Rabobank is forecasting a relatively stable cow herd over the next three years between 27.9 and 28.3 million. Cow-calf producers remain relatively quiet about the prospects of restocking pastures. That stands in contrast to the continuous dialogue regarding the production and price risks casting doubts on the segment.

The last herd rebuild started in 2014, but remember the short-term milestones that preceded it. The percentage of heifers in the fed cattle slaughter mix peaked in 2010, the beef cow cull rate spiked in 2011 and beef replacement heifer inventories didn’t post a year-over-year increase until Jan. 1, 2012.

More recently the heifer slaughter mix peaked in 2023, and the cull rate reached multiple-decade highs in 2022. Now, the focus is on heifer retention, and that remains a sticking point for this rebuild.

Macroeconomics outline declining supplies and steady demand, or increasing demand and steady supplies, lead to higher prices.

Supply Versus Demand

For nearly three decades, the U.S. beef industry has been in a declining supply and increasing demand market. Absolute prices and volatility have increased significantly over that time, but per-head profit margins have not followed the same uptrend.

Commodity producers largely operate on thin margins, and competition within and across the beef and cattle producing segments has kept margins low, while volatility in returns has increased. That is why U.S. producers are expressing more caution during this rebuild.

The beef consumer’s role in supporting each U.S. cowherd rebuild has been discussed many times. Tighter supplies motivate higher meat case and menu prices, allowing producers to receive a higher percentage of beef spending. The July average USDA all-fresh beef retail price pushed to new highs at $8.15 per pound. Even with relatively steady beef demand, Rabobank expects annual average retail beef prices to approach $9.50 per pound around 2027.

That means 500-lb. steer calf prices could advance to annual averages near $400 per cwt as early as 2026, and replacement female prices follow the calf market. It is possible $4,000 bred heifers are in the producer’s future. CattleFax estimates current prices around $2,800 per head. That is creating pause for a segment dominated by part-time operators facing production risks and less of an appetite to take on more.

El Niño didn’t offer the weather benefits needed to recover pastures in major cow-calf producing regions in 2023 and early 2024, and a return to La Niña in late 2024 will cast doubt on forage availability.

A decade ago, interest rates were 3% to 4%. Today, those loans have an 8% to 9% rate. Aging producers are looking to transition out of the business, but younger producers are struggling to fill the void.

These pressures will likely amplify the rate of consolidation within the cow-calf segment and silence opportunities for smaller operations to expand profitably going forward.

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Herd Size

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What Should Bred Heifers Be Worth?

Nalivka: Herd Rebuilding – A Weighty Financial Decision

Nalivka: What’s Impacting the Pace and Extent of Herd Building?

7 Ways to Help Beef Producers Evaluate Potential Replacement Heifers

U.S. Cattle Inventory Down 2%, Beef Cows Down 2%

Increasing the Resilience of the Beef Cattle Supply: Impact of Drought on Cattle Numbers

Ag Economist Talks Trends To Watch In The Livestock Industry

America’s Top 33 Beef Cow Counties

You Ain't Seen Nothing Yet: Why Economists Say Cattle Prices Will Soar Even Higher This Year

Several Reasons for Slow Herd Expansion

Ag Economists Cast Doubt On Just How Much of a Reduction the U.S. Cattle Herd Has Seen in a Year

What to Watch Over Next 6 Months

Will Cattle Prices Smash New Records This Year, Topping 2014?

Read More: Cattle Inventory By Number: How Does It Compare?

The Gas Tank is Empty

It’ll Take Longer to Rebuild This Time

Higher Highs for Prices?

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Counting Cows: Drought, Costs Will Drive Further Reductions

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Cows and Heifers

Dairy Cows

Calves and Feeders

Bottom Line

The Future of the Beef Industry: New Survey Data Shows Producers Are Optimistic

Looking to the Future

Breakdown of Survey Respondents

Are Cattle Producers Rebuilding Their Herds Now?

Volatility Will Increase

Rebuilding The Cowherd Remains On Hold

How Historical Cattle Cycles Are Shaping Inventory and Production Today

Supply Versus Demand