Beef Expansion Likely to Slow

Chris Hurt, Purdue University Ag Economist, recently discussed his outlook for beef profits and prices, noting that the US beef herd expansion has been very rapid. Record high beef cattle prices during 2014 and the first half of 2015 encouraged beef herd owners to hold heifers back and build cow numbers. The January 1, 2016 USDA Cattle Report showed that beef cow numbers are up 4% and cow and calf numbers up 3% year over year. The report also showed that 3% more heifers were held back to calve leading to higher expected calvings, 6%, compared to one year ago.

Feeder cattle supplies are up 4% leading to larger slaughter cattle supplies in late 2016 and 2017, probably pushing beef prices and feeder calf prices down further. 2015 beef supplies were larger than anticipated at years beginning. USDA expected that cattle available for slaughter would be down 5% but beef was actually up 1%. Where did the added beef come from? Heavier calves and higher beef imports. Beef production worldwide is growing. Beef competitors, pork and poultry, are expanding also. This expansion leads to likely 2016 finished cattle prices averaging around $125 per cwt. Feeder calf prices are now near $195 per cwt. for 550 pound calves leaving little if any profits for beef cow owners. That means beef herd expansion is likely to slow soon. It also means there will be pressure for herd owners to reduce costs. Feed prices have declined in the last several months, but at least in some areas of Nebraska grazing costs are still high compared to calf prices.

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