It is a hot topic of discussion in the U.S. cattle industry: How can operations increase or even maintain beef production if the cow herd continues to shrink?

“I suspect that carcass weights will show little or no upward trend in the next decade compared to the last 20 years,” said Derrell Peel, Oklahoma State University Cooperative Extension livestock marketing specialist. “Thus much of the compensation for a declining inventory that was offset by increasing carcass weights in the past will not be available going forward.”

However, a number of factors will affect the ability or inability of the U.S. beef industry to continue current levels of production without rebuilding the herd, which may be getting lost in some of the conversations, even among expert analysts.

“It has been appropriately and correctly noted that some of the superlatives used by myself and others, such as the fact that the current beef cow herd is the smallest since 1963, are relevant only in a broad historical context,” Peel said.

Peel points out that many things have changed, including the fact that the industry is much more efficient and cattle are bigger now, resulting in significantly more pounds of beef produced per cow. In short, it is difficult to assign a particular beef inventory level compared to history.

“A more relevant time period is the last 20 years,” he said. “The beef cow herd in 2010 was about 1 million head smaller at 31.4 million head than it was in 1990, when it was 32.5 million head.”

In the intervening years, the cow herd increased to a cyclical peak of 35.2 million head in 1996 to an apparent cyclical low of 32.9 million head in 2004, before the market shocks since 2007 pushed the herd down to current levels.

Beef production in 2010 is projected at 26.03 billion pounds, 15 percent higher than 1990’s larger beef cow herd, about equal to the level in 1996 at the recent cyclical peak in cattle numbers and within 3 percent of the all-time annual beef production record of 26.8 billion pounds in 2000.

“Beef and cattle trade plays a role as well,” Peel said. “However, the relative importance of beef and cattle trade, in terms of overall production levels, has not changed much in the past 20 years.”

Beef imports

Net beef imports have accounted for roughly 4 percent of total beef production since 1990 and have, in fact, been smaller at roughly 2 percent of total annual production in the last three years. Net live cattle imports have averaged less than 6 percent of total slaughter since 1990 and will be slightly higher than that in 2010.

“While beef and cattle continue to grow in importance in terms of industry value, it does not explain our ability to maintain beef production in the face of declining U.S. cattle inventories,” Peel said. “The fact is that we have culled an average of more than 11 percent of the beef cow herd each of the past three years.”

Beef cow slaughter as a percent of the beef cow inventory has averaged 9.3 percent since 1990. Since 1990, it has only been higher than 11 percent once, in 1996. Measured another way, beef cow slaughter has represented more than 10 percent of total cattle slaughter each of the past three years.

Another rough measure of slaughter intensity in the U.S. beef industry is that total slaughter will represent more than 94 percent of the 2010 calf crop. This value has averaged 88.3 percent since 1990 and the estimate for 2010 is the highest level over the 20-year period.

“The bottom line is that it will not be possible to maintain beef production in coming years if we do not rebuild the cow herd,” Peel said. “It’s also true that we will not be able to rebuild the cow herd without reducing slaughter and beef production for at least a two- or three-year period.”

Prices seem to be approaching levels that will entice cow-calf producers into some level of herd expansion in the next couple of years. Smaller beef production will support higher beef and cattle prices.

“Consumers, who have for the most part not seen any impacts of this situation, will experience higher beef prices in the coming years,” Peel said. “This will provide a critical test of beef demand to see how consumers react to generally higher beef prices.”