Year-over-year increases in both U.S. beef cows and beef replacement heifers show last year’s start to beef herd expansion is on solid ground.
Beef cows are up 750,000 head, 3 percent, over last year’s July inventory, and heifer replacements are up 300,000, 7 percent, according to USDA National Agricultural Statistics report released July 24.
The increases were expected and confirm the industry is in full blown, cyclical expansion, though it’s still just starting, said Derrell Peel, livestock marketing specialist with Oklahoma State University.
And, he said, it’s been a long time coming — about 20 years.
The last such expansion tapered off after a cyclical peak in 1996, followed by prices that were telling the market the beef herd had gotten too big. Drought extended a normal liquidation period into 2004, he said.
A mini expansion in 2004 and 2005 was cut off in 2006 by tremendous shocks in input prices — feed, fuel and fertilizer — and poor returns caused the liquidation to continue, he said.
The recession in 2008 and 2009 negatively affected beef demand, and widespread drought, particularly in the Southern Plains, from 2011 through 2013 curtailed attempts at rebuilding, he said.
“We spent most of about 18 years in liquidation mode,” he said.
Those external factors led to a beef herd that was getting smaller than it needed to be from a market sense, he said.
The resulting “tremendous” prices in 2014 and improved drought conditions, which eliminated drought in most of the country except the West, fueled the start of expansion last year, he said.
Producers are responding to basic price signals, but it’ll take a couple of more years to build the herd to the level it needs to be to be compatible with the market, he said.
All cattle and calves, including dairy animals, are up 2.1 million from July 2014 and USDA expects the 2015 calf crop to increase 400,000 head, 1 percent, year over year.
If realized, the calf crop will be larger than the previous year for the second consecutive year, a growth not seen since 1994-’95, livestock economists Ron Plain and Scott Brown, University of Missouri, reported in the University’s Cattle Outlook report July 24.
But the initial effect of herd rebuilding is even tighter supplies of feeder cattle, and 2015 will be the low supply point in this cycle, continuing to squeeze feedlot operators, Peel said.
There’s a bout a two year lag to start seeing the effects of expansion on beef production. In the meantime, expansion will continue in 2016, much like 2015, he said.