The U.S. beef cow inventory has reached its lowest point since 1962, marking what appears to be the bottom of the current cattle cycle. Tight supply is driving the strong pricing environment beef producers are enjoying today.
“For cow-calf producers right now, things are as good as they’ve probably ever been,” says Troy Rowan, University of Tennessee assistant professor. “Even though things are really good, producers are conscientious and vigilant about potential challenges,” Rowan summarizes.
Agreeing with Rowan, South Dakota cattleman Ken Odde adds while profits are currently strong, inflation quickly erodes economic gains. He stresses the importance of risk management and diversification.
Early Signs of Herd Rebuilding?
This is the million-dollar question: Are there encouraging signs of expansion?
“The beef industry is not currently in herd expansion mode, with producers hesitant to retain heifers due to high costs and economic uncertainties,” says Dave Weaber, Terrain senior animal protein analyst.
In Drovers State of Industry Report to be released the week of Sept. 15, we breakdown the July USDA cattle inventory and cattle on feed reports. While the USDA reports showed the smallest U.S. herd in history and continuing tightening numbers on feed, analysts predict producers have not experienced the highest cattle prices, yet.
“Our national herd size has the industry at an interesting point,” Rowan says. “Prices are at all-time highs, inputs are reasonable and more cow-calf enterprises are profitable than ever. When the industrywide rebuild will happen remains up in the air, but producers are keeping in mind that the high-flying industry right now is not going to stick around forever. They’re starting to adopt new technologies, leveling up their crossbreeding programs and expand opportunities for non-cattle related income on their ranches.”
Weaber adds producers need to be intentional about herd expansion, understanding the financial implications of adding new cattle.
Beef-on-Dairy Fills the Beef Supply Gap
“The current dynamics of supply is going to be a challenge,” says Jarrod Gillig, Cargill senior vice president, managing director for beef.
Gillig summarizes the cattle industry is experiencing a critical period of transition. He doesn’t expect the cow herd to return to previous peak levels of 32 million head. Instead, he predicts the gap in supply will be filled by beef-on-dairy calves.
Nick Hardcastle, Cargill senior director of meat grading and technical specialist, explains how the beef-on-dairy calves are an upgrade to the traditional Holstein steer and the positive impact they are making on beef supply.
“Beef-on-dairy is more desirable because it helped overcome several Holstein difficulties,” he says. “Improvements include red meat yield — more meat to a consumer — as well as improved acceptance in branded programs.”
Hardcastle says the beef-on-dairy cattle are filling the supply gap by filling pens in the Plains states where feeders are needed, and they are widely accepted by feeders and packers.
Defining Future Beef Producer Success
Odde says the beef industry is not just surviving but positioning itself for significant transformation.
“Producers who remain flexible, technologically savvy and strategic in their approach will be best positioned to thrive in this changing environment,” he says.
Weaber agrees saying successful producers will be those who can adapt, manage costs effectively and align themselves with evolving market trends.
“Don’t let cost get away from you,” Weaber warns, emphasizing that “being a low-cost, high-productivity producer means you get to make money seven, eight or nine years of the cycle.”
He stresses the importance of understanding financial implications, particularly during market transitions.
“If we’re not working on the business, we can’t work in the business,” Weaber adds, summarizing his philosophy regarding producers’ need to adopt more strategic, data-driven approaches.
The State of the Beef Industry Report includes input from nearly 500 beef producers. The annual report provides information to help producers when making decisions. Click here to download the full report.
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