STILLWATER, Okla. – The mid-year cattle inventory report issued by the USDA July 20 indicated the total United States cattle herd had decreased slightly, including the beef cow herd specifically.
This report followed the mixed January report where all cattle numbers were up slightly, while the beef cow herd was down slightly.
“Also in the July inventory report,” said Derrell Peel, Oklahoma Cooperative Extension Service livestock marketing specialist, “beef replacement heifers were down 6 percent. All of these numbers confirm that the industry is not growing, and the replacement numbers imply that we don’t have a lot of intention to grow, at least in the short run.”
Theories. Peel said there are two lines of reasoning as to why this is happening. First, that there is no longer a cattle cycle, or it has changed fundamentally. Second, he explained, this could be a temporary disruption, “which is the idea that I subscribe to.”
The beef industry is unique among most markets and especially the agriculture markets because it has a definite cycle of inventories and prices. That’s because of the biology of the animal, Peel offered.
“First, we’re tied to fixed forage bases and producers tend to respond when the market forces them to, not necessarily sooner than that.”
“Also, since cattle only produce single offspring (with rare exceptions), to grow the supply of animals, we have to hold back heifers for breeding. That creates a short-term shortage of supply,” he said.
“At the other end, when there are too many animals, producers have to get rid of breeding animals to cut herd size, and that causes a temporary glut in meat supplies.”
Uncertainty. He said he thinks there’s an incentive for growth, “but the industry has been battered by a series of droughts throughout different parts of the country, there is uncertainty due to international trade issues and there are some health issues, so producers are cautious.
He said the latest thing to hit producers is the issue of feed costs and the uncertainty of the feed market due to the ethanol phenomenon, which has caused corn prices to rise significantly, bringing other feed costs up, as well.
For all of these reasons, Peel said producers are moving very slowly and cautiously toward a modest expansion that he believes will stretch out over the next two to four years.
“In Oklahoma,” he said, “it’s tough for producers following drought and the severe effects it had on local operations. We’ve had a lot of moisture this year and we’re growing a lot of forage, but that has not translated into expansion intentions, for all of the reasons I’ve cited. Also, producers this year are having trouble putting up hay because of too much moisture, and many cows are still in stress due to the drought.
Calf crops. “The drought led to lower calf crops,” he explained, “and we may see residual effects of that for the next year, so we will have a limited rate of growth until we recover from just the physical stress these cows have been through in the past couple of years.”
This also implies that prices will remain fairly stable for the next two years or more.
“I think we’ll continue to see strong farm and retail levels. We have strong supply fundamentals to support present cattle prices, and I don’t see any breaks coming from the relatively high retail prices of beef from the consumer standpoint,” Peel said.
Trade. “From another perspective,” Peel added, “these prices may also affect the recovery and re-establishment of our international trade market. With supplies tight and prices high, it’s a greater challenge to recapture those markets overseas.”
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