Female Role In Cattle Cycle Complex

There are numerous unique factors that make the beef cattle industry complex, said Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist, in a letter called Cow-Calf Corner.

 

THE TRADE-OFF

 

Two biological facts are critical: cows have one calf at a time in a rather slow biological process; and two, heifers can be used for current beef production or breeding for future production in a one for one trade-off.

That means that when the cow herd, is low, heifer retention to increase beef production makes the already short supply of beef even smaller before the cow inventory can expand and lead to increased beef production with a two to three-year lag, he said.

Looking at the last four cyclical beef cow herd expansions since 1975, with the exception of the truncated 2005-2006 expansion, the other three cycles have several similar characteristics, Peel said.  In most cases, the total increase in the cow herd from trough to peak was 2.2 to 2.9 million head, an increase of 5.8% to 9.4%.

The corresponding increase in replacement heifers ranged from 1.1 to just over 1.2 million head in three of the four cycles, he said.  The most recent cycle, from 2014-2019, was different in that the increase in beef replacement heifers started prior to herd expansion and ended prior to the peak in herd inventory.  This likely is an indication that there was pent-up desire to expand that was delayed by drought in 2011-2013.

 

THE inverse

 

There is an inverse relationship between heifers used for beef production and heifers retained for breeding, Peel said.  In each cycle, as the beef replacement heifer inventory increases, the percentage of heifers in the fed slaughter total necessarily declines.

The decline in this percentage in the most recent cycle was especially sharp, dropping below 34% for three years, the lowest levels in the 49 years from 1975-2023, Peel said.

 

THE OUTLOOK

 

This all provides some insights into the future, he said.  Heifer slaughter as a percent of fed slaughter was as high as it has ever been at 40% in 2023, matching the previous high of 40% in 2000 and 2001.

At the same time, the replacement heifer inventory has been decreasing and the beef cow herd continues to decline, Peel said.  In the first quarter of 2024, the heifer slaughter percentage was 40.5%, down fractionally year over year for the same period.

It is not clear if the next herd expansion will require the heifer slaughter percentage to drop as much as the 2015-2017 period, but it must drop below the long-run average of just over 37% and likely to the 35%-36% range.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers last week ranged from $184.00 per cwt to $194.17, compared with the previous week’s range of $184.00 to $189.52 per cwt.  FOB dressed steers, and heifers went for $289.67 per cwt to $300.73, compared with $289.94 to $295.35.

The USDA choice cutout Tuesday was up $1.67 per cwt at $312.12 while select was up $1.71 at $304.43.  The choice/select spread narrowed to $8.69 from $8.73 with 96 loads of fabricated product and 24 loads of trimmings and grinds sold into the spot market.

The weighted average USDA listed wholesale price for fresh 90% lean beef was $350.98 per cwt, and 50% beef was $70.93.

The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.38 to $1.50 a bushel over the Jul corn contract, which settled at $4.60 ¾ a bushel, down $0.01 3/4.

The CME Feeder Cattle Index for the seven days ended Monday was $248.63 per cwt, down $0.21.  This compares with Tuesday’s Aug contract settlement of $264.60, up $4.37.