Herd Expansion? BEEF Readers Say It’s “Go” TimeHerd Expansion? BEEF Readers Say It’s “Go” Time
According to a July survey of BEEF readers, herd expansion is well underway. See what readers have to say about their cowherd plans for 2014 in this exclusive BEEF report. Download the entire report, which contains much more demographic detail.
September 4, 2014
As the old cliché goes, if the good Lord’s willing and the creek don’t rise — or go dry — the beef industry is poised for some significant restocking and expansion. That’s the take-home from a BEEF survey of readers conducted in late July that shows the pent-up desire to restock and expand the cow herd is already underway.
BEEF emailed slightly more than 30,000 readers, asking them to share their thoughts and plans regarding their marketing and herd expansion plans this fall. A few more than 1,000 responded, for a 3.3% response rate. Here’s what you told us.
Stocking up on heifers
Based on survey results, enthusiasm for expansion is high. When asked about plans in 2014-15 concerning their cowherd, 51.7% of respondents say they plan to expand by 1% to 10%; 19.4% plan to grow by 11% or more; and 17.1% plan to keep their herd size about the same (Figure 1).
Those results show a marked increase in optimism from the 2013 BEEF survey published in December. Then, 38% of respondents said they planned to stay with the same number of cows they carried in past years. Another 33.5% indicated they planned to expand by 1%-10%, and 13.4% planned to expand by 11% or more.
As we enter fall 2014, the “girls” will lead the charge as cattle producers restock. When those who plan to expand were asked how they will accomplish that, 84.2% said they’ll hold back heifers, while 36.7% say they’ll buy replacements. The numbers add up to more than 100% because some producers plan to do both. Only 12.8% plan to sell fewer cull cows, perhaps because there just aren’t many cull cows left to sell (Figure 2).
Those who plan to retain heifers from their 2014 calf crop will, as a general rule, keep quite a few. In fact, 36.1% indicate they’ll keep more than 20% of their 2014 heifer calves. The remainder are fairly evenly distributed, as 15.1% plan to keep 15% to 20% of their heifers; 14.4% plan to keep from 10% to 15%; 18.3% say they’ll keep back 5% to 10%; and 16.1% will keep 1% to 5% (Figure 3).
And why are cattle producers keeping heifers? Because the market is telling them to, according to 52.6% of respondents. In addition, more producers have pasture this year, with 46.7% saying the drought is over. Further, 18.4% say they bought or leased more land, and 15% are adding a partner or family member to the operation (Figure 4).
Not all respondents plan to expand, however. In fact, some are looking to cut back, as 6.4% of respondents plan to contract by 1% to 10% in 2014-15, and 3% plan to contract by more than 10%. An additional 1.2% plan to retire, and a similar percentage plan to get out of cattle production but not retire from their ag operations.
That’s slightly fewer than the results from the end of 2013 indicate. Then, 4.8% indicated they planned to get smaller by 1% to 10%, and 2.5% planned to cut back by 11% or more.
Of those who plan to reduce herd size, the majority (52.7%) say they’re getting older and want to cut back. Another 26.9% are still fighting drought, while 8.6% say feed costs are too high. In addition, 6.5% say feeder prices are too high, and 6.5% say land is too expensive. However, 22.6% have other reasons. “Run the opposite way of the majority,” one respondent said. “High prices of calves; I don’t expand during high prices, I expand when prices are low,” said another (Figure 5).
For those who plan to grow numbers, green grass and high prices are the biggest incentives. “Have extra pasture if it continues to rain,” said one respondent. “More cattle equal more money,” said another.
What’s more, BEEF readers say they began retaining heifers in earnest last year, with 75.2% saying they retained heifers from their 2013 calf crop (Figure 6). Of those who kept heifers, 32.2% kept more than 20% of their heifer calves; 12.9% kept 15% to 20%; 13.2% retained from 10% to 15% of last year’s heifers; 19.9% kept from 5% to 10%; and 21.9% kept from 1% to 5% (Figure 7).
And it appears that many of those heifers have stayed in the breeding herd. Of the total number of 2013 heifers they held back as replacements, readers say they kept 69.4% in the herd and sold 30.6% as feeder cattle (Figure 8).
When asked why they sold their 2013 heifers, 42.7% said feeder prices were high and they took the money to the bank. Another 17.3% said they’re still battling drought, and forage and pasture conditions are sparse; and 4.6% are getting older and want to cut back.
However, 44.9% had other reasons, most having to do with herd improvement. “Weren’t the keeping kind,” said one respondent, summing up many of the comments.
For the calves that will head to town this fall, BEEF asked readers how they plan to market their 2014 calf crop. The results show a mix of marketing methods will be used.
About a third of respondents (30.2%) plan to market traditionally, with the calves priced and sold at weaning (Figure 9). However, 31.8% plan to precondition their calves, then price and sell them 30-60 days postweaning. What’s more, 23.1% plan to retain ownership and sell their calves as yearlings, while 17.4% will retain ownership through the feedyard and sell the calves as fed cattle. An equal percentage — 6.6% each — will either lock in a price before weaning and sell at weaning, or lock in a price before weaning and sell 30-60 days postweaning. The numbers add up to more than 100% because some respondents will market their calves several different ways.
The vast majority, 86.7%, don’t plan to change marketing plans for their 2014 calves. Of the 13.3% who do, higher prices and more forage were the driving factors on both ends of the decision-making spectrum. “Forage is available, and heavier cattle sell for more money,” said one respondent. “Money, little interest in holding until they are yearlings. Too much downside risk,” said another (Figure 10).
Sticking to tried-and-true marketing methods, 63.4% will sell their 2014 calves at live auction. In addition, 27.3% will sell through direct trade; 11.8% use an order buyer; 9.4% plan to use a video auction; and 7.8% will use another marketing method. Most of the alternative marketing methods are various direct-marketing channels to consumers, tele-auctions or retained ownership feeding. Numbers equal more than 100% because of multiple answers (Figure 11).
Preconditioning still popular
With record-high calf prices, some analysts have wondered if preconditioning will fall out of favor. According to BEEF readers, however, that’s not going to happen to any major extent. A slight majority, 57.8%, plan to precondition their calves and sell them as value-added animals, while 42.2% don’t plan to do this. However, only 17.6% said they have preconditioned their calves in the past but discontinued the practice (Figure 12).
For those who stopped preconditioning, 53.6% say the premium for value-added calves isn’t enough to make it pay, and 32.7% say the market is high enough for them to change management practices. Beyond that, 7.1% say they couldn’t find a buyer for their value-added calves, while 17.9% had other reasons ((Figure 13).
Has the intense cow liquidation of the past several years meant a younger cowherd nationally? To some extent, yes. When asked the percentage of the cowherd in various age classes, respondents indicate that 43.63% are 3-5 years old; 39.77% are 6-8 years old; and 16.6% are 9 years old and older (Figure 14).
“We are seeing more growth plans in our current survey when compared with our 2013 survey,” says Scott Grau, BEEF’s director of research.
“A more aggressive growth plan — expanding the cowherd by more than 10% — is being planned by nearly one in five operations. This is a 6% increase over our previous study — 19% in 2014, compared with 13% less than a year ago in our 2013 study,” he notes.
Interestingly, the way respondents plan to expand the cowherd remains the same between the two surveys: heifer retention. “Overall, cow-calf operations are looking to maximize long-term profit potential by expanding their operations,” Grau says. “This is driven by two main factors: high beef prices and easing of drought conditions in some affected regions.”
While BEEF surveys have shown a strong pent-up desire for several years to restock and expand, the full extent of any heifer retention remains to be seen, Grau points out. “It will be interesting to see over the next few years if the beef cycle will re-engage, or if a new market paradigm will emerge for the beef industry.”
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