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USDA says cattle herds expand as feed prices fall

After seven consecutive years of decline, USDA is reporting a slight increase in cattle numbers, about 1 percent over cattle numbers reported last fall.

Amid steady beef prices and strong demand, cattle numbers may finally be on the upswing, marking what could be a slightly quicker recovery of cattle herds than expected after producers greatly reduced herd size over recent years in response to dire drought conditions and the spiraling cost of feed and forage.

After seven consecutive years of decline, USDA is reporting a slight increase in cattle numbers, about 1 percent over cattle numbers reported last fall. The latest cattle numbers were released by USDA in late January in USDA's semiannual report.

Economists are saying the current expansion of cattle herds is most likely in response to forage restoration and lower feed prices, and sparked by steady beef prices and greater demand.

Purdue agriculture economist Chris Hurt says multiple incentives to expand herd size cropped up in 2014, prompting many producers to start the rebuilding process faster than expected.

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"These were led by record-high cattle prices in 2014, with finished cattle averaging near $155 per live hundredweight," Hurt said "The other part of the incentive was more abundant feed due to a retreating drought in the Central and Southern Plains that restored range conditions and to favorable feed crop production in 2013 and 2014 which lowered corn and protein feed costs."

By the end of January, Hurt said 500 to 550 pound steer calves were averaging $250 in Oklahoma, a positive signal to producers that beef prices remain steady and confidence for a steady beef market to continue this year.

According to the latest USDA report, the most significant expansion has been in beef cows, up 2 percent from the previous year. Producers added 610,000 new beef cows nationally, a trend Hurt said should continue over the next several years.

Southern Plains leads expansion

USDA reports the Southern Plains expanded cow numbers by 375,000 head in 2014, about 60 percent of the country's expansion. Texas cow numbers were up 270,000 head (7 percent) and Oklahoma cow numbers were up 105,000 head (6 percent).

The Western Corn Belt added 96,000 cows, led by Missouri, 61,000 cows, and Iowa, 25,000 cows. The Central Plains were led by Kansas with 63,000 new cows and by Colorado with 35,000 new cows. Eastern Corn Belt beef cow numbers expanded by 3 percent (40,000 cows) and the Southeastern U.S. added 32,000 head.

The rebound comes after cattle numbers had declined over the past several years to their lowest levels in over 50 years. While economists say a rebuilding of cattle herds was certain, current trends seem to indicate 2015 may show surprising levels of increase in cattle numbers.

Beating expectations

USDA had been expecting a 2 percent drop in beef supplies this year, but that may be offset because of the higher calf numbers and heavier marketing weights this year.

"With feed prices in 2015 expected to be the lowest in five years, higher weights will likely continue, and beef supplies for 2015 could be in a range from down 1 percent to up 1 percent," Hurt predicts.

The beef industry will see stiffer competition from other meats this year. USDA expects poultry supplies to rise 3 percent or higher in 2015, and they predict pork could jump as much as 5 percent this year. But Hurt said beef demand will most likely benefit from a stronger economy and a moderate growth in consumer income. Also expected to help beef are lower fuel prices.

Dairy cow numbers were up 1 percent and the number of dairy heifers being held back to enter the herd were also up 1 percent. The 2014 calf crop was larger than anticipated as the calving rate of 88.5 percent of total cow numbers at the start of 2014 was the highest in several years. This larger than expected pool of calves will increase slaughter supplies, especially late in 2015 and into 2016.

Hurt expects finished cattle prices to average $150 to $157 in 2015, with prices in early spring in upper $150s and the lower $160s and then to fall to near $150 by summer.

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