“Some cow-calf operations will see 2014 as the golden opportunity to get out with record-high cow prices,” says Chris Hurt, Extension agricultural economist at Purdue University. “But the greater tendency will be for producers to hold on to the cows for the profitable opportunities that are expected over the next three or more years.”
Though preserving the industry’s infrastructure demands herd expansion, and early signs indicate producers want to expand, it will be slow going.
“Lower total cow inventories at the start of 2014 will limit herd expansion, resulting in lower beef production for the next couple of years,” say analysts with USDA’s Economic Research Service (ERS) in the February Livestock, Dairy and Poultry Outlook.
Likewise, Chris Hurt, Purdue UniversityExtension agricultural economist, noted recently, “While the incentives have turned positive, they have not been in place long enough for the industry to begin registering signs of expansion, according to USDA numbers. The rebuilding of the beef herd is expected to take multiple years.”
While the USDA's most recent cattle inventory report showed that the number of replacement heifers held back for breeding is up about 2%, Hurt says that increase isn't likely enough to grow beef cow numbers this year.
Whether the national beef herd grows or declines in the coming months and years will depend, in large part, on cow slaughter numbers, Hurt says.
“Some cow-calf operations will see 2014 as the golden opportunity to get out with record-high cow prices,” he explains. “But the greater tendency will be for producers to hold on to the cows for the profitable opportunities that are expected over the next three or more years.”
Hurt believes key hindrances to expansion include:
• Retaining heifers to replace breeding cows is expensive for producers.
• Beef producers have struggled through a long period of narrow margins, so it will take a longer time of profitability to restore their confidence.
• Drought still has its grasp on large areas of beef-production regions.
With that said, Hurt explains, “The price outlook is extremely favorable for 2014 to 2016 for the beef industry. Beef supplies this year are expected to be down 5%, while domestic demand is expected to remain positive.”
“With normal weather and other conditions, total beef supplies could begin to
increase above current levels as soon as 2016, although perhaps not significantly
until sufficient heifers have been added to the herd to provide the calves needed to
increase beef production,” ERS analysts say. “However, historically low inventories of beef cattle will likely provide the cattle/beef sectors their best opportunities for financial recovery over the next two to three years.”
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