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I received this article in the Economic Policy Update. It is from Kenny Burdine, University of Kentucky College of Ag beef specialist and I wanted to share it with you.
In late January, USDA released their annual cattle inventory report, which estimated the size of the US cow herd. As expected, beef herd liquidation continued during 2010 despite the stronger fall markets. US beef cow numbers fell by 1.6 percent, which was largely consistent with pre-report estimates. The number of heifers held for beef replacements may have been the biggest surprise of the report, falling by about 5 percent. With fewer cows and less heifer development, the 2011 calf crop will clearly be smaller than 2010.
Of course drought was a factor on many Kentucky beef cattle operations last year. Many began feeding hay in mid-summer and reports of hay shortages are becoming more common. This was no doubt part of the reason why Kentucky beef cow numbers continued to decrease. Also, rising production costs and increased competition for land for row crop production were at play. Kentucky beef cow numbers were estimated to be down by 47,000 (-4 percent). Kentucky’s cow herd has decreased by 184,000 cows since January of 2007.
Since cow herd expansion is clearly not under way, it is worth revisiting some cattle cycle basics.
The initial sign of expansion is an increase in heifer retention rates. Once this happens, it takes approximately two years for those heifers to be developed, bred, and to wean their first calves. Therefore, even if expansion were to begin in 2011 (and I want to stress the “if”), we are still at least two years away from seeing larger calf crops.
So, while there are some clear market risks, including beef demand and grain prices, beef supplies should remain very tight over the next few years.