January 22, 2015
There’s a chance everyone will be surprised, but the sure money among industry analysts and pundits alike is that the forthcoming USDA Jan. 1, 2015 Cattle Inventory report will show that herd rebuilding is well underway.
“What we’re seeing today are market prices that are increasingly a market insistence that we need to be bigger,” Derrell Peel, Oklahoma State University Extension livestock marketing economist, told a packed room at the Southwest Beef Symposium recently in Amarillo, Texas. “We are smaller than we need to be.”
And while he’s certain that 2014 data will show herd rebuilding is underway, he says that’s not really the question. “If you can tell me what the weather will be and (what) drought conditions (will be), we’ll know if that’s sustainable going forward. But once we stop liquidating, then the next question is how big do we need to be?”
A look back at recent history might give a clue. “If you go back to 2004, we tried to grow from there. We had minor growth to 2006.” But remember what happened then? “That’s when the feed market shocks, the ethanol juggernaut, fuel prices, fertilizer prices, took us for a ride in 2008 and 2009. Then recession in 2009 and 2010 aggravated it. It was really cost-side impacts that caused this liquidation (since 2007). So all else being equal, the last time we tried to grow as an industry was at 32.5 million (beef) cows,” he says.
Last year’s Cattle Inventory report pegged beef cows at somewhere around 29 million. “When you look at U.S. demand, international potential and other things, I think this industry needs to be somewhere in the 32 to 34 million head (beef) cow range,” he says. “We’re a lot smaller than we need to be and we took a long time to get here for reasons we didn’t plan on. In order to rebuild, it’s going to take some time.”
Just how long is how long? Since cows don’t have litters, Peel says it will be next year or into 2017 before we see any payoff from heifers retained in 2014. Then there’s this: will cattle producers believe it’s going to be good enough long enough to make it worth the extremely high prices we’re seeing for breeding animals?
In addition, Peel says you have to factor in things like the age of the average cattle producer, financial considerations and what the weather might do. “All those are things that could slow down (rebuilding) even slower than the biology lag does,” he says.
Here’s Peel’s bottom line: “When I look at the numbers and look at a relatively aggressive expansion starting from a year ago with some expansion beginning in 2015, I think we’re talking out to 2020 or beyond to get us very far back to that 32 to 34 million head.”
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