Improving drought conditions have analysts hoping for beef herd expansion
Bridgeport, Neb. – It will all depend on the weather. After suffering from several years of drought in the heart of the beef industry, some states are experiencing enough recovery they could start expanding as early as this year.
“The 2013 drought conditions have started to improve in the United States,” University of Nebraska-Lincoln Economist Kate Brooks said during the 2014 Beef Feedlot Roundtable in Bridgeport, Neb. last week. “There are some clear signs that herd liquidation is stabilizing. As we start into 2014, we hope to continue with herd stabilization, but it will depend upon how much moisture we receive.”
The USDA reported on Jan. 1 that there are only 29 million cows in the U.S. It is the smallest cowherd since 1951.
Brooks hopes a little rainfall can reverse what seems like a never-ending downward trend.
“We saw another decline in cow numbers in 2014, but we are hoping it will stabilize this year, and increase in 2015,” she said. “Pasture improvement and the amount of moisture we receive will play a large part in what happens this year.”
“In 2012, 55 percent of the pastures were in poor to very poor condition, and 71 percent of the cowherd in the U.S. was living in those conditions. We saw some improvement in 2013, but there were still 10 percent of the pastures in poor to very poor condition,” she noted.
The Great Plains region was severely stricken with drought and is just now showing signs of recovery.
In 2012, 80 percent of the pastures were rated poor to very poor, and in 2013, that number had dropped to 27 percent.
Brooks showed producers a chart of the Great Plains region and indicated the states above and around this area are returning to normal, but areas in Nebraska, Kansas and Colorado are still suffering. In these areas, 40 percent of the pastures are still in poor to very poor condition.
With the cowherd and feedlot areas moving north into the Great Plains, recovery from this drought will play an important role this year determining how much cowherd expansion can take place.
“The question will be whether or not we get adequate rainfall in April and May so the pasture conditions can start to improve,” she said.
Brooks said Texas producers have suffered from the drought for so long, that they are no longer expanding their herds.
“They have overgrazed many of their pastures,” she added.
Because of this, the U.S. cowherd is shifting to the north and west right into the heart of the Great Plains.
Feeder cattle placements are also shifting north and west, Brooks continued. In 2012, Texas, Nebraska and Kansas were feeding 55 percent of the cattle on feed.
“Since then, Nebraska has shown the largest increase mostly because of the availability of distiller’s grains,” she said. “In the coming years, I expect to see more movement of cattle on feed into the Great Plains, especially in Nebraska. Texas is going to continue to see a decline.”
The Nebraska calf crop is about 1.7 million head, which is significantly less than the number of cattle fed in the state.
“It shows that a significant number of cattle are shipped into the state to be fed,” she said.
Brooks also expects to see prices continue at record highs.
“At the end of January, fed cattle prices hit $1.50 but are now down to about $1.41. I expect them to continue to fluctuate around that mark,” she said. “We just didn’t see the strength in the futures market that we did in the cash market, so boxed beef prices are coming down.”
Retail prices of beef reached record highs last year, and Brooks expects boxed beef wholesale prices to reach record highs this year.
“I think we will continue to see these record high prices through 2014. The big question is going to be how consumers will respond to that,” she mentioned
“Through 2014, 2015 and possibly 2016, prices could remain at record levels until there is an increase in our beef production. The problem is it takes a long time to increase beef inventory because the U.S. only averages 0.9 calves per cow each year. We need to find a way to produce two or three calves per cow,” she joked.
The feedlot industry is starting to see better margins, but excess capacity is pushing those margins smaller, especially with record high cattle prices, Brooks said.
Meanwhile, heifer replacements were up two percent in January 2013 and two percent again in January 2014. However, with record high cattle prices last year, most of those heifers were later placed in feedlots and sold as finished beef.
“We will see what happens this year,” Brooks commented. “A lot of people are holding back more cows and retaining more heifers to rebuild their herd. As a whole, we are working with a younger cowherd because most ranchers culled their older cows.”