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Serving: IA

Rapid cattle herd expansion likely to slow

cow with two calves in a field 0220H3-1760A
STILL EXPANDING: This year’s January Cattle Inventory Report indicates the industry is still expanding, even with the collapse in fed and feeder cattle prices in 2016.
Nation’s beef cow herd is growing at a pace beyond what’s been seen in recent history.

At the beginning of each year USDA releases its annual January Cattle Inventory Report. As expected, the Jan. 31 report confirmed that the U.S. cattle herd continued to expand last year, albeit at a more robust pace than was expected.

Record-high prices for replacements in recent years are keeping aging cows in production. Producers have quite a bit of money tied up in those females, and cyclically weakening calf prices have extended payback periods.

Both bred and open heifer markets spiraled lower last year. Yet, heifer retention is up, as lower-priced replacements likely created a buyers market for those still looking to expand. Favorable forage conditions have certainly influenced these decisions.

Largest cow herd since 2010
Nationally, beef cow numbers rose 3.5% in 2016. The Jan. 1 inventory of 31.21 million head was the largest since 2010. A 3.5% increase may not seem that large; however, it is worth noting that we have not seen a year-over-year increase of that magnitude since 1994. Total three-year herd expansion, 2014 through 2016, is the largest since the mid-1970s. So, the beef cow herd is growing at a pace beyond what we have seen in recent history.

The beef cow herd was up in all of the 10 largest beef cow states by inventory, except South Dakota and Montana. The South Dakota beef cow herd declined by 6,000 head, while the Montana herd was unchanged from a year ago. The largest increase in beef cow numbers occurred in Texas, Oklahoma and Missouri — up 492,000 head in total. Iowa, the ninth-largest beef cow state, was up 25,000 head. 

The Jan. 1 inventory of beef replacement heifers was 6.42 million head, up 1.2% year over year. Among the top 10 beef cow states, beef replacement heifers were up in six states — Texas, Montana, South Dakota, Missouri, Kansas and North Dakota. Oklahoma, Nebraska, Iowa and Kentucky had fewer replacement heifers compared to Jan. 1, 2016. The result was a net increase of beef replacement heifers of 2.3%, or 83,000 head, among top 10 states.

A way to put the level of heifer retention in perspective is to consider it as a percentage of the total U.S. beef cow herd. This measure averaged 17.3% between 1970 and 2016. For 2016, heifer retention as a percent of the beef cow herd was 20.6%, down just slightly from 2015. With a backdrop of historical cycles, we currently have one of the youngest herds in history. The young herd should be very productive, a plus in terms of cost of production and efficiency. Plus, the industry has not just added numbers, but also has added genetic potential.

The 2016 U.S. calf crop was 35.08 million head, up 2.9% from 2015. A larger calf crop resulted in a 2.2% increase in estimated feeder cattle supplies on Jan. 1. Increased heifer retention and fewer feeder cattle imports limited what could have been a much larger inventory of feeder cattle supplies. While more feeder cattle are on the ground in 2017, supplies appear unlikely to be especially burdensome to feeder markets.

Expansion likely to slow in 2017
We are now three years into herd expansion. Unless something drastic changes between now and the end of the year, herd expansion will surely continue in 2017, albeit at a more moderate pace than the aggressive rate of herd expansion of the last several years.

The decline in calf prices during 2016, and resulting falloff in profitability for cow-calf producers, likely waned producer’s interest in further increasing the size of their herds. However, market prices are still at levels that should allow for follow-through on plans that are underway.

Schulz is the Iowa State University Extension livestock economist. Contact him at [email protected].

TAGS: Beef
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