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Beef cattle herd expansion progress report

Contributed by Lee Schulz Published on 10 February 2017

On Jan. 31, the USDA released the January Cattle Inventory report, which confirmed expectations of a continued expansion of the U.S. cattle herd in 2016. However, the report showed a more robust pace than expected.

Record-high prices for replacements over the past few years are keeping cows in production. There is quite a bit of money tied up in those females, and cyclically lower calf prices have extended the payback period. The past year saw bred and open heifer markets go through a downward spiral, yet heifer retention is up because lower priced replacements likely created a buyers’ market for those still looking to expand. Favorable forage conditions also have certainly influenced these decisions.

The Jan. 1, 2017, beef cow inventory of 31.21 million head was the largest since 2010, and was up 3.5 percent in 2016.

A 3.5 percent increase may not seem that large; however, it is worth noting that we have not seen a year-over-year increase of that magnitude since 1994. Total three-year herd expansion, 2014 through 2016, is the largest since the mid-1970s. So, the beef cow herd is growing at a pace beyond what we have seen in recent history.

Among the 10 largest beef cow states by inventory, the beef cow herd was up in all states except South Dakota and Montana. The South Dakota beef cow herd declined by 6,000 head, while the Montana herd was unchanged from a year ago. The largest increase in beef cow numbers occurred in Texas, Oklahoma and Missouri, with a total increase of 492,000 head. Iowa, the ninth largest beef cow state, saw a 25,000 head increase.

The Jan. 1, 2017, inventory of beef replacement heifers was 6.42 million head, up 1.2 percent year over year.

Among the top 10 beef cow states, beef replacement heifers were up in six states: Texas, Montana, South Dakota, Missouri, Kansas and North Dakota. These three states – Nebraska, Iowa and Kentucky – had fewer replacement heifers compared with last year. The result was a net increase of beef replacement heifers of 2.3 percent, or 83,000 head, among the top 10 states.

One way to put the level of heifer retention in perspective is to consider it as a percentage of the total U.S. beef cow herd. This measure averaged 17.3 percent between 1970 and 2017. For 2016, heifer retention as a percent of the beef cow herd was 20.6 percent, down just slightly from last year. With a backdrop of historical cycles, this is one of the youngest herds in history. That equals a herd that should be very productive, a plus in terms of cost of production and efficiency. The industry has not added just numbers; it’s added genetic potential.

The 2016 U.S. calf crop was 35.08 million head, up 2.9 percent from 2015.

A larger calf crop resulted in a 2.2 percent increase in estimated feeder cattle supplies on Jan. 1, 2017. Increased heifer retention and fewer feeder cattle imports limited what could have been a much larger inventory of feeder cattle supplies. While there are more feeder cattle on the ground in 2017, it does not appear that supplies are likely to be especially burdensome to feeder markets.

We are now three years into herd expansion and unless something drastic changes between now and the end of the year, herd expansion will surely continue in 2017, albeit at a more moderate pace than the aggressive rate of herd expansion of the last several years.

The decline in calf prices during 2016, and resulting falloff in profitability by cow-calf producers, likely waned producer interest in further increasing the size of their herds. However, market prices are still at levels that should allow for follow-through on plans already underway.  end mark

Lee Schulz is an Iowa State University Extension livestock economist. This originally appeared in the February 2017 ISU Growing Beef newsletter.

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