With US beef cow numbers near historical lows, and the new year just begun, many cow/calf producers must be wondering if now might be a good time to retain heifers. Market analysts likely are wondering the same thing and what retention or non-retention will mean to the markets.
Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel addressed the issue in the latest Cow-Calf Corner from OSU Extension.
COW/CALF RETURNS UP
Average Oklahoma steer calf prices increased more than 61% from 2022 to 2024, leading to a sharp increase in average cow-calf returns, Peel said. Returns varied significantly across producers because of widely inconstant costs of production, but the message was clear – increasingly strong market signals for cow-calf producers to expand the beef cow herd.
Positive cow-calf returns typically result, with a delay, in herd expansion, he said. There was a sharp move to higher cattle prices leading to the herd rebuild in 2014-2019, and heifer retention began in 2012, setting the stage for herd expansion that began in 2014.
Increased heifer retention simultaneous with increasing cattle prices squeezed feeder supplies leading to the (then) record feeder prices in 2014–2015, Peel said.
NO DISCERNIBLE HERD BUILD
However, replacement heifer inventories have shown no significant increase thus far in this cycle, despite rising feeder cattle prices, he said. Heifer slaughter data through the end of the year, along with heifer on-feed inventories and feeder cattle sales receipts data all suggest little, if any heifer retention in 2024.
Not only did the beef cow herd likely get smaller in 2024, but the limited supply of replacement heifers also suggests the beef cow herd may get smaller yet in 2025 or, at best, stabilize at very low inventories, Peel said.
Historically, herd expansions require a year or two to gain momentum before herd inventories begin to increase, he said. This process has not begun at this time.
WHAT TO EXPECT
If heifer retention begins in 2025, several outcomes are expected: tighter feeder supplies will push cattle prices and cow-calf returns higher; retained heifer calves will lead to increased replacement heifer inventories in 2026 and potential herd growth beginning in 2027, Peel said. Depending on the pace of heifer retention, herd expansion could lead to cyclical production increases and price peaks in the second half of the decade.
If heifer retention does not begin in 2025, the cow herd will continue to dwindle, and cattle supplies will continue to contract with higher cattle prices and a smaller industry until herd rebuilding begins. Either way, cattle prices are expected to remain elevated for at least two to four more years.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $197.00 per cwt to $201.40, compared with last week’s range of $191.11 to $197.07 per cwt. FOB dressed steers, and heifers went for $304.49 per cwt to $314.77, compared with $301.97 to $310.00.
The USDA choice cutout Thursday was up $2.17 per cwt at $330.78 while select was up $1.46 at $308.35. The choice/select spread widened to $22.43 from $21.72 with 89 loads of fabricated product and 27 loads of trimmings and grinds sold into the spot market.
The USDA-listed weighted average wholesale price for fresh 90% lean beef was $333.63 per cwt, and 50% beef was $104.04.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.25 to $1.38 a bushel over the Mar corn contract, which settled at $4.56, up $0.02.
The CME Feeder Cattle Index for the seven days ended Wednesday was $275.00 per cwt, up $2.14. This compares with Thursday’s Jan contract settlement of $269.22, up $3.65.