SPRINGFIELD, Ill. 鈥 As long as farmers keep selling heifers at the rate they are now, it will still be a while until the cattle herd rebuilding starts, says Derrell Peel.
The Oklahoma State University Extension livestock and marketing specialist says he thinks that will keep cattle prices high for two to four years.
鈥淲e鈥檙e not done with high cattle prices,鈥 he told those attending the Illinois KQB Cow-Calf Forum Nov. 8 in Springfield.
Todd Jokisch, a commercial cow-calf producer in attendance, sells into the freezer market in the Ashland area in Cass County, Illinois. He said he is paying attention to Peel and others talking about price trends.
鈥淭he price of fat cattle affects freezer beef,鈥 he said.
The marketing information 鈥済ives us food for thought,鈥 said Betsy Pech, who operates a Hereford herd in Logan County in central Illinois.
鈥淎t some point, we have to stop eating heifers if we want to get bigger,鈥 Peel said at the event organized by the Illinois Beef Association and Kent Nutrition Group.
This year, on Jan. 1, the U.S. had the smallest herd in decades. It looks like it is down again.
鈥淥n Jan. 1, 2024, it will be the smallest herd since pre-1960,鈥 he said.
The small herd can be attributed in part to lower heifer retention. It will take a long time for herd expansion at the current rate, Peel said.
鈥淚ndividuals will need to figure out what that means to them,鈥 Peel said.
Mike Mason, who has a cow-calf operation near Emden in Central Illinois, said he likes hearing it is a good time to expand.
鈥淚 have already started,鈥 said Mason, who sells feeder calves.
Mason started with about 20 head earlier this year and says he expects to expand to 25 to 30, reaching his goal herd size in 2025.
Feeder steer prices saw 鈥渁 dramatic run-up鈥 this year, Peel said. Even though they have dropped a little, they are still 40-50% above a year ago.
While an earlier USDA Cattle on Feed report brought prices a little lower, Peel says the trade was mostly looking for an opportunity for profit.
鈥淚 don鈥檛 think it changes the fundamentals,鈥 he said.
While there are some differences, he compares conditions today to those in 2014. From 2011 to 2013, 鈥渢he herd was lower than we intended or needed it to be.鈥 It was much the same as the liquidation in 2021 and 2022.
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The drought this time isn鈥檛 as widespread or as severe as in 2012, but it did lower numbers, Peel said.
鈥淲e are smaller than we need to be,鈥 he said of conditions again.
In 2022, U.S. beef production was at all-time highs, at the expense of the herd.
鈥淵ou can only eat them once,鈥 he said.
Peel said production will likely be down 5.7% at the end of the year compared to last and continue downward for two or three years.
鈥淭he drought is still causing regional liquidation but not so much nationally,鈥 he said.
On the demand side, grocery store beef prices were at all-time record highs in September. There are lower-price alternatives consumers could turn to, Peel said.
鈥淧ork loin is the biggest bargain,鈥 he said.
He agreed with a producer who repeated the maxim 鈥渢he cure for high prices is high prices.鈥 However, consumers are still choosing beef.
鈥淭here鈥檚 not a big impact yet,鈥 he said.
As for trade demand, the U.S. had record beef exports in 2022. Exports are down about 12% from last year, he said. Exports to Japan are down, to Canada about the same, and up to Mexico, he said.
At the same time, total cattle slaughter in the U.S. is down 4.4%, he said. The makeup of that slaughter is worth noting, as 51.4 % were females.
鈥淭hat hasn鈥檛 happened since 1986,鈥 Peel said, not even in the last drought.
The last time rebuilding took place, replacement heifer numbers shot up to record levels and culling was reduced, he said. Culling, which remains high now, 鈥渨as cut to the bone鈥 then, he said.
鈥淭he market wants us to rebuild and it will provide incentives,鈥 he said.
In 2014, heifer replacement was building up before expansion on the national scale. That hasn鈥檛 started yet, he said. Cattle slaughter also dropped. It has not dropped nearly to the level yet that would be needed to rebuild, Peel said.
For expansion, female numbers have to increase. Some producers are just out of drought, their forage is recovering and they are not ready to restock yet. High input costs also encourage some beef producers to keep selling cattle at current prices.
Producer age may also be a factor, Peel said. Some producers may see high prices as providing a good time to start an exit strategy.
The Livestock Marketing Information Center is projecting higher cattle prices into at least 2025, Peel said. The LMIC is a partnership between state university Extension specialists, USDA economists, industry associates and the center鈥檚 staff.
鈥淗igh prices are here for at least two years. We have not reached the peak,鈥 Peel said. 鈥淲e will peak and there will be a backside. At this point, I don鈥檛 see it as dramatic as 2015.鈥
He said herd expansion will look different this time than in 2014.
鈥淚t will take longer to get there, and it will last longer,鈥 he said.