Beef Expansion Is Underway
Chris Hurt, Extension Ag Economist - Purdue University
The nation’s cattle producers are expanding the herd and they’re doing it at a somewhat faster rate than had been anticipated.
USDA, in the semi-annual update of cattle numbers, calculates the total number of cattle and calves has increased by a bit more than one percent. It is the first increase in the cattle inventory since 2007. The industry suffered high feed prices and poor pasture conditions in the Southern Plains over the intervening years. 2014 provided a series of reasons to change course says Purdue University Extension Ag Economist Chris Hurt.
Quote Summary - There were multiple incentives to expand in 2014. These were led by record high cattle prices, with finished cattle averaging near $155 per live hundredweight and Oklahoma 500–550 pound steer calves averaging $250 per hundred. 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.
The most significant expansion is underway in the beef herd where beef cow numbers are up two percent from year-ago levels. The number of beef heifers being held back to enter the breeding herd is up four percent. Significantly, the number of those retained heifers that will calve this year is up seven percent. This means 61 percent of the beef heifers that have been retained to enter the breeding herd were already bred at the start of this year. The 2014 beef cow herd expansion, thinks Hurt, is likely the beginning of a multi-year increase.
Quote Summary - It is common for the beef herd to be in expansion for four to six years. With 2014 registering as the first year of expansion, expansion could continue through most of this decade. If so, peak beef production on this cycle would not be expected until early in the next decade.
Beef supplies, however for this year, will not change much. This might lead one to anticipate prices to be near the $155 finished cattle price of 2014. However, 2014 was an exceptional year, and meat prices in general this year may be lower explains Chris Hurt. Currently, futures markets are heavily discounting cash cattle prices, suggesting 2015 average finished cattle prices in the higher $140’s. However, he expects finished cattle prices to average $150 to $157 in 2015, with prices in early spring in upper $150s and the lower $160’s and then to fall to near $150 in summer and then to end the year in the mid-$150s.