Historically high calf prices and improved forage conditions in some key production areas sound like the right ingredients for an expanded U.S. cattle herd, but producers so far have resisted.
"We've had nine years of positive returns for cow-calf producers," says Kansas State University (KSU) ag economist James Mintert. "That suggests we should be expanding beef cow herds, but economic incentives are not as strong as you´d think."
Mintert says rising production costs are curbing producer interest in growing herds, citing recent survey information that indicates lease rates on summer pasture in Kansas have climbed 16% in the past five years. Interaction with producers shows that, in many cases, rates have increased faster than that, the economists said.
Reduced forage options stemming from several years of drought in recent years have been largely responsible for holding back beef cow herd expansion, Mintert says. The weather situation has now improved in some important cattle areas, including Kansas, but worsened in others.
Surging corn prices are another "input" that have made cattle producers reluctant to expand herds, adds KSU ag economist Rodney Jones.
"In past years when corn prices have spiked, they would only stay up for a few months at most -- not long enough to influence forage program prices significantly," he says. That situation has changed, with corn prices holding strong because of demand for corn from ethanol producers, livestock feeders and export markets.
Corn demand will ultimately impact grazing rates as corn growers are pressured to put pastureland into crop production, and as there is increased demand for forage-based production systems, Jones says.
Kansas corn prices in mid-July averaged $3.46/bu., down $0.38 from a month earlier, but up $1.11 from mid-July 2006, according to the Kansas Ag Statistics Service.
In addition to rising costs of feeding cattle, be it on pasture or on feed, cattle producers are also facing higher fuel and utility costs, just like the rest of the nation.
Based on current data and with no immediate relief in sight for high fuel prices, Jones and Mintert say they expect little to no expansion of the U.S. cow herd in the near term.
"A sound management information system is more important than ever for cow-calf producers," Jones says.
-- KSU release