Charting the Course for the Beef Cow Herd

By Patrick Linnell Director of Cattle Market Research, CattleFax

Cattle cycles can have long tails, and that is shaping up to be the case this time around. The latest USDA Cattle Inventory report showed the nation’s beef cow herd declining below the prior cycle low in 2014 to 28.9 million, the smallest since 1962.

Improved drought conditions combined with stronger prices and cow-calf margins will eventually incentivize expansion. That much is nearly guaranteed. The more significant question is how long the contraction continues and when expansion can feasibly begin. It all comes down to cow culling and heifer retention.

Beef Cow Inventory

back to the breeding herd in time to be exposed this spring. However, that is an unlikely scenario at this point. Even as the La Niña pattern weakens and brings improved moisture, current forecasts indicate it won’t be quick or wide enough.

That leaves this fall as the next major opportunity for producers to retain heifer calves, the more likely scenario considering the long road to drought recovery in many areas. A spring-born heifer calf retained this fall would first calve in 2024 and be counted by USDA as a beef cow in January 2025. Expect more heifer retention this fall, but exactly how many will be a big factor in whether the cow herd bottoms in 2024 or 2025.

The cow culling rate can change rapidly if forage, water and cash flow allow. While these factors are all slated to improve substantially this year, they are not there yet. January finished with the highest culling rate for the month since 1986 but culling is forecast to fade sharply below year-ago levels by the fourth quarter of the year. Beef cow slaughter is currently forecast to drop 700,000 head in 2023. But that would still be within liquidation territory at a culling rate of more than 11% primarily due to relatively large slaughter here in early 2023.

In terms of heifer retention, the ability to expand will be limited near-term by the smallest beef replacement heifer inventory since 2011. If drought improves in a big way soon, some heifers that are currently in non-replacement routes could still be diverted

Hay Supplies Paint Bleak Picture

By Katelyn McCullock Director of Livestock Marketing Information Center

The Dec. 1 hay stocks released by USDA NASS in January showed the U.S. continues to have very low supplies on hand, down 9% from 2021 and 6% below the next lowest value (2012). The volume of hay declines can be largely attributed to lower other hay production because of yield declines and smaller harvested acres of alfalfa hay. The U.S. hay number does not separate hay into types and provides the total by state for Dec. 1.

This very low supply situation gives way to relative pessimism for livestock producers who in many parts of the U.S. have already endured record high hay prices and will very likely not see relief until well into harvesting season, if at all. Weather will play a critical role in how quickly hay prices come down, and across the Great Plains, the drought in Texas, Oklahoma, Kansas and Nebraska pulled hay from other areas last year, creating an even wider footprint than did the drought conditions. LMIC has hay prices remaining at or slightly below record high prices as it may take more than one good year of yields to ease hay prices.

Competition for hay has been fierce in the last several years, and livestock producers are already talking of having a hard time finding hay to buy should they need it. One nuance to the hay market has at times been the export market and its role in competing for high quality hay. In early February, the USDA Foreign Agricultural Service (FAS) released the December data for 2022. The results showed that the alfalfa export market held even with last year, purchasing roughly the same quantity but paying 16% more for U.S. alfalfa. China, which is the dominant force in the U.S. alfalfa markets, bought 5% more alfalfa but paid 20% more than a year ago. Saudi Arabia was another strong buyer, increasing purchases by 47% and paying almost double 2021’s value. Saudi Arabia is the third largest market for U.S. alfalfa trailing behind Japan. Japan pulled back purchases of alfalfa in 2022, down 16%, and value declined by 5%. South Korea, Taiwan and United Arab Emirates (UAE) round out the other largest destinations for U.S. alfalfa. They declined between 18-42% each, while values lost only 4-15% from the previous year.

Downstream segments will especially need to pay attention to heifer retention trends. Calf crops will continue to decline into roughly 2024. But heifer retention will make the available supply of feeder cattle and calves, and ultimately fed cattle and beef supplies, even tighter yet. How much tighter depends on exactly how aggressively producers retain heifers.

Bottom line: From what is known today about heifer retention and cow culling, the expectation is for a calf crop that bottoms in 2024 and a beef cow herd that bottoms in January 2025. Look for both to increase thereafter. This timeline could be shifted forward or back by a year depending how expansion unfolds. Fed slaughter tends to follow the beef cow herd trends by about a year, depending on market signals and the drought cycle.

Other hay exports took a larger toll due to higher other U.S. hay prices, declining 14% in volume from 2021, but only 3% in value. All the top buyers reduced volumes: China, Japan, South Korea, Taiwan and UAE. China was the largest year-over-year change, down 52%, followed by UAE, down 36%. Values were lower as well but not by nearly as much. South Korea behaved the most like 2021, decreasing purchases only by 4% but paying 7% more than in 2021.

In general, total hay exports represent close to 3% of total hay production; however, in short years that can be a much larger share. In 2022, total U.S. exports of alfalfa were equivalent to roughly 6.5% of total U.S. production versus 6.4% in 2021. Other hay exports were roughly 2% of production compared to 2.5% the previous year.

Hay supplies will be touch-and-go for the first half of 2023, if not later, depending on spring moisture. Forage conditions and the potential for another year of drought will put the beef cow herd in another precarious position, and any weather troubles will very likely mean further culling. It’s been a difficult couple of years, and unfortunately, it’s too early to say if we are out of the woods yet.

2023 Ncba Policy Priorities

ADVANCE NCBA’S FARM BILL PRIORITIES

•Secure reauthorization of the animal health provisions in the 2018 Farm Bill and advocate for expanded funding of the National Animal Vaccine and Veterinary Countermeasures Bank (NAVVCB) to protect against Foot and Mouth Disease (FMD).

•Expand accessibility and fund risk management programs and disaster relief programs within the Farm Bill, to support financial stability for producers.

•Protect and fund EQIP, CSP, and other voluntary conservation programs that incentivize sciencebased, active management of our natural resources.

•Defend against the addition of a livestock title.

Defend Against Policies That Hurt Cattle Producers

•Preserve critical tax code provisions that promote a viable business climate and support future generations of family operations.

•Combat overly restrictive Packers & Stockyards (GIPSA) rules.

•Implement our wins and push for further hours-ofservice/ELD flexibility for livestock haulers.

•Protect working lands and guard against federal overreach that limits grazing rights.

•Protect the cattle industry from regulatory attacks under WOTUS, ESA, emissions reporting, and more.

•Engage in legal action to protect producers’ rights.

Deliver More Wins And Opportunities For Cattle Producers

•Secure full reauthorization for Livestock Mandatory Reporting (LMR).

•Ensure electronic identification (EID) requirements for traceability are implemented efficiently, and without costly burdens to producers.

•Level the playing field and fight for fair, accurate labels on fake meat products.

•Build on record-breaking export sales by expanding market access through science-based, rules-based trade standards, and ensure equivalent animal health and food safety standards for imported beef.

•Work with USDA to implement reforms to the “Product of the USA” label that promote voluntary, verified, and trade-compliant labeling that returns more value to producers.

•Advance animal health practices and innovations that are critical to the beef industry’s viability.

•Support the congressional reauthorization of the Animal Drug User Fee Act at FDA (ADUFA 5) with no post-market amendments.

•Advocate for Dietary Guidelines for Americans that keep beef at the center of the plate.

•Promote the vital role of working lands in conservation efforts and keep grazers grazing on open, healthy public lands.

•Promote cattle grazing’s science-backed role as a climate solution.