Excitement for herd expansion tempered by replacement cattle and land costs

Feb 10, 2012
by DTN

Dave Hamilton raises a few thousand head of cattle in Nebraska’s Sandhills and he’s stocked his pastures to capacity. His neighbors are doing the same.

“There’s excitement in the air,” he said. “The price of bred females is going up. The market is really good on calf prices and yearling prices, and fed cattle prices, too. So I think there are economic incentives being sent and people are looking to expand,” he said on the sidelines of the National Cattlemen’s Beef Association annual convention in Nashville. The U.S. cattle herd hasn’t been this small since 1952 and with beef exports expected to grow steadily from 2011’s robust performance, prices look to stay lofty.

There’s a “tremendous amount of demand” for pasture from Nebraska ranchers looking to add to their herds, as well as Texas and Oklahoma ranchers looking to move cattle up north after the crippling drought.

“You read about different ways to run cows,” he said, “in confinement, in dry lot situations. When the economic incentive is there, boy, people look at alternatives to try and take advantage of it.”

But for many cow/calf producers at the convention, the pressures of alternative land use and the cost of replacement heifer prices are frustrating barriers.

“I’d love to expand,” said Ed Greiman, who runs a grain farm, feedlot and cow/calf operation in Iowa with his brother. “But land that used to cost $3,000 to $4,000 per acre now costs $7,000. That’s land I’d say is good for hay or pasture, but at $7,000 an acre, you have to grow row crops to justify it.”

As for Danni Beer in Lemmon, SD, her area has just pulled through a drought of its own. Ranchers are expanding, but the cost of replacement heifers has slowed the pace. “Three or four years ago you couldn’t sell a black heifer for $550. Now they’re going for twice that,” she said.

Out in the Sandhills, Hamilton said bred heifers run from $1,700 to $2,200 depending on their age and genetics.

“They are (high prices), on the surface. But if you look at what calf prices are, we have 5-weight calves bringing in $2 a pound. Yearling prices, you know 8- to 9-weight yearlings, are in the $1.50 to $1.60 per pound range. So based on those prices, maybe the bred cow market isn’t too high,” Hamilton said.

Some people are keeping a few more calves than usual as replacements. Montana and Wyoming ranchers aren’t expanding rapidly, partially because their pasture is host to refugee cattle from Texas, but may be holding on to 10 to 20 calves more than usual.

That’s what David Dick from Sedalia, MO, is doing. He runs about 150 cows and usually culls 10 percent of his herd each year.

So instead of retaining 10 percent of his calf crop as replacements, he’s keeping 15 percent.

“I begin to build the numbers. It’s not rapid, but it still happens. And it allows me to actually keep more of my better heifers,” he said. He said the producers in his area are cautiously optimistic. They realize the Texas drought really cut cow numbers.

“They’ve also got in their mind that that market situation could impact the consumer, whether it’s grocery store or restaurant trade, because high price one place has to be found somewhere else. They understand both sides of it.

So I would say, yeah, they’re cautiously expanding. And I’d say if the weather allows, it’ll happen. I won’t say at an accelerated pace, but at a steady pace.”

Jimmie Long, an order buyer in Missouri and past president of Missouri Cattlemen’s, said some people are retaining a few extra heifers, “but you get really talking to them and they’ve got some cows that are going to have to go. So I don’t know that we’re building the herd up.”

Five or six years ago, Long reduced his herd because of a dry summer and an icy winter and hasn’t really built it back up since. He hasn’t bought a female in 32 years, he said, and may retain a few extra calves this year.

And as an order buyer, he hasn’t bought many heifers to go back to ranches to become cows. “I think I bought maybe a dozen. That’s nothing. I’ve got an order in from a guy who wants me to buy him 10 in the next couple of weeks. That’s nothing also,” he said.

But by and large, he said pressure to convert pasture to row-crop ground is heavy in Missouri. There are people bidding to pay $120 to $150 in cash rent to grow row crops on ground that’s historically been pasture, which rents for $40 to $50 per year.

“We’re losing a lot of acres. There’s a land war over acres for cattle or row crops,” Long said.

Iowa’s Greiman agrees.

“The Midwest can’t expand fast enough. If we’re going to rebuild the herd, the growth is going to have to come from cow states,” he said.

But the ranchers in Kansas, Oklahoma and Texas are waiting on the weather. Pastures are still dry across Kansas, and ranchers are waiting to see if recent rains keep coming before they add heifers or keep extra calves, said Stephen Russell of the Kansas Beef Council.

And in Texas, Long said he’s heard some producers may put light heifers on the pastures that are recovering from the drought nicely, hoping the pasture will fully recover by the time they calve.

Jon Johnson, an associate director of Texas Farm Bureau, said wheat pasture is helping to alleviate some of the immediate pressure to find forage. Fall rains helped grass pasture some, with many parts of grazing country receiving several inches, but recovery takes time.

“Pasture may be starting to recover in areas but the stock ponds and water tanks aren’t filling up. That’ll have to happen before people get serious about expanding,” he told DTN.

Some cattle were still bred last fall and it remains to be seen how many calves they’ll produce. “Conception rates dropped; you know they had to because of the stress. We don’t know how serious just yet.”

Whether Texas ranchers start considering serious expansion depends on their pasture, Johnson said. “If we have good spring rains, if we can make hay, they’ll start to add. But if it doesn’t, well, we’ll just have to see what they do.” — Katie Micik, DTN