They’re not going to appear out of thin air and I don’t think it’s feasible for us to build them in the basement out of spare parts.”
That means, says Derrell Peel, Oklahoma State University Extension livestock marketing economist, that the cattle industry will have to rely on the usual process to rebuild the cowherd. With 2013 shaping up to be the year that heifer retention could begin in earnest, he says an already thin feeder cattle supply will be stretched even thinner.
“By my estimation, the 2013 calf crop is the smallest since sometime around 1942,” he says. But his data only goes back that far. “I don’t have data that goes back far enough to (show feeder supply to) be as small as I think it is this year.”
As calf and feeder cattle numbers have decreased, the market has been sending signals to expand. “But a bunch of other things happened – we had the shots (by ethanol) to the feed market that completely turned the cattle feeding industry on its ear, and we’re still working our way through those implications and will be for some time. We had a recession and then drought.”
So even though there’s been a positive economic base for cow-calf producers for much of the last 10-12 years, external factors have forced the industry to liquidate.
In Peel’s mind, that will change in 2013. “I would say there’s a very high probability that we significantly start heifer retention this fall,” he says.
If Mother Nature cooperates, Peel projects heifer retention will continue for at least four years. His projections show that cattlemen will retain 3 million heifers this year, 3.2 million in 2014, 3.3 million in 2015, 3.1 million in 2016, and 3.2 million in 2017.
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But that’s just heifer retention. How many of those heifers actually enter the cowherd is the key to rebuilding the herd. However, he expects the intensity with which those heifers are used, or the percentage that become cows, will increase.
The other factor in the herd rebuilding equation is cow slaughter. While he expects beef cow slaughter to decline in the coming years, he says the market will temper that to a degree. “There’s a pretty strong market from the hamburger side for cull cows. That market is going to continue to bid for those animals as we squeeze that supply.”
However, he says the indicators point to a year of stabilizing cattle numbers in 2013, then pushing herd growth around 2% year-over-year for the next several years. “But the bottom line is, that kind of growth tells us that by January 2017, we really have only rebuilt the herd to where we were in 2011 when we started the drought.”
It also means feeder cattle supplies will continue to tighten. “We’re going to see feeder supplies that won’t reach their tightest point until 2015 and probably 2016,” he says. “Maybe sometime in 2016, we begin to transition into a little bit bigger feeder calf supply. In the meantime, we’re going to have not only limited numbers but extremely high prices.”
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