Profit incentives fostered by higher cattle prices and lower feed costs have interested cattle producers in expanding herds, says Purdue University extension economist Chris Hurt.
However, profit incentives haven't been around long enough for the industry to begin registering signs of expansion, according to USDA inventory numbers, and the herd rebuilding may take multiple years.
A bit of background
Hurt says the cattle herd in the U.S. has been in a long-term decline with the number of beef cows at the lowest level since 1962, according to USDA.
The most recent phase of the decline began in 2007 as a result of two basic drivers: sharply higher feed costs forcing cattle feeding into large losses which depressed calf prices; and drought conditions in major beef cow production areas, which also caused herd reductions.
According to Hurt, beef cow numbers fell by 253,000, or 1%, in 2013 with most regions of the country reporting fewer cows. The biggest decline in numbers was in the Southeastern U.S. with a reduction of 118,000 cows followed by the Pacific Northwest 88,000; the Northern Plains 62,000; and the Southern Plains 57,000 head.
The continual decline in beef cow numbers since 2007 now means the 2014 calf crop will be very small, about 33.7 million head, a 10% reduction since 2007.
Prices ready to encourage production
The negative profit incentives and drought since 2007 have discouraged the cattle industry. However, the financial incentives have recently shifted back to strong profitability.
The two factors driving the strong profit incentives are the small number of fed cattle and calves which keep beef supplies extremely low and much lower feed costs starting last fall with normal U.S. yields of corn, soybeans, and forages. These factors have resulted in record high prices for fed cattle and calves this winter, Hurt explains.