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Expansion plans, or lack thereof, will determine this fall’s cow run.
October 22, 2015
As the beef industry enters into the heart of the fall season, given the market events of the past several months and the intention of beef producers to expand the cowherd, what can we expect in the dynamics of the cull cow market? A review of where we’ve been might provide some indication around where we’re headed with respect to the keep-cull decisions which will be made in the coming months. That’s especially important given the current operating environment.
This week’s illustration outlines monthly beef and dairy cow slaughter since January 2000. Several key trends are important. First, while dairy cow slaughter fluctuates over time, from a broader perspective, the overall slaughter trend remains relatively flat at about 225,000 head per month. That pace is consistent with the dairy industry’s 10-year annual average inventory of around 9.2 million head.
Beef cow slaughter, however, is another story. The pace of liquidation peaked in 2011; since that time, there’s been a persistent decline. August 2015 scored a new low of only 152,000 head, versus over 360,000 head at the peak in September 2011.
All that said, uncertainty remains with respect to what might occur this fall. That’s especially true given recent market action. While beef producers have been working both sides of the equation to spur expansion—reduced culling and more replacement heifers—that could change fairly quickly. That is, if risk appetite begins to wane, the first indicator will likely be more cows coming to town.
How do you foresee this playing out in the coming weeks and months? Will market prices disrupt the recent emphasis on expansion, at least on the cow side? How concerned are producers about the recent volatility and long-run price prospects? Has your strategy for expansion changed because of recent market swings?
Leave your thoughts below in the comments section below.
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Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.
Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs. He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.
Contact him at [email protected].
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