“It is likely that we are near the end of the herd growth phase of the cattle cycle, though it is worth noting there is not yet clear evidence of entering a contraction phase as calf prices remain at profitable levels,” says Josh Maples, Extension livestock economist at Mississippi State University, in a recent issue of In the Cattle Markets. “A shift higher in prices could push more expansion while lower prices in 2019 could lead to contraction.”
Moreover, in weekly market comments, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, says the recent Cattle report indicates enough beef replacement heifers to support minimal expansion this year.
There were 5.92 million beef replacement heifers Jan. 1, according to the Cattle report. That was 183,300 head fewer than a year earlier or 3.0% less.
“Beef replacement heifers as a percent of the beef cow herd on Jan. 1 of 2019 was 18.7%. This ratio is down from 19.4% one year ago as heifer retention moves closer to levels consistent with zero herd growth,” Peel explains. “A record heifer retention level occurred in 2016 with beef replacement heifers at 21.0% of the beef cow herd. Over the past 30 years this ratio has averaged 17.8%.”
Currently, there is nothing to suggest much contraction after the herd reaches a cyclical peak.
“While cyclical expansion may be mostly complete, there is no indication of herd liquidation at this time. Average cattle prices are expected to continue at current levels and seem likely to hold cattle numbers steady in 2019,” Peel says. “Future market conditions, good or bad, could prompt additional expansion or liquidation in 2020 and beyond. Producers should continue to monitor domestic and international market conditions to see what new cattle market direction emerges in the coming months.”