More cows, please

Sep 20, 2013

Cows? Where are all the cows?


After roughly two years of major drought conditions in much of the U.S., the beef industry has been forced to liquidate the nation’s cow herd even further. So when will the re-building come? I am optimistic that it will be this next year.

Last week we experienced major moisture events in much of the country. Here in Colorado we received a years’ worth of rain and hail in roughly four days. Larimer County in central Colorado received up to 18 inches of rain in a few short days and many parts of the state received three to six inches of rain. If we continue to have hot weather we should make enough grass to go into winter in much better shape. This rain was a real drought buster.

Feed costs will certainly be the lowest the cattle industry has seen in quite some time. Many areas of the country have reported good supplies of hay, but hay might be the weakest link in the feedstuffs markets. Corn and distillers grains will not be an issue this coming winter.

Crop reports have consistently demonstrated we’ll have the largest corn crop in history at 13.8 billion bushels and the December futures contract is hovering around the $4.50 area which is a far cry better than the $8 we saw last summer.

Now that were coming into fall, we’ll start to see more cows show up at auction markets as ranchers start to wean and pregnancy check their cows and heifers. Traditionally, this is when the big beef cow runs start. Preg checking is one of those tasks that are better done early. But for many big range outfits, it’s just not feasible until they bring the cows of the mountain and start weaning.

They have another decision to make at weaning— how many heifers to hold over for replacements and how much to grow the herd. We should start seeing some bred heifer sales advertised very soon. Superior Livestock Auction has, for the first time, designated one sale for bred stock only, instead of selling the bred stock at the end of their regular feeder calf sales.

Cow slaughter the past few weeks has been down around 15 percent from the same weeks a year ago. Year-to-date cow slaughter is down about 1 percent or 13,000 head from last year’s pace when we cleared around 1.6 million cows from the nation’s cow herd. Over all, cattle slaughter is currently 355,000 head behind last year’s pace. Of that, fed heifer slaughter is down 2 percent or 129,000 head below year ago levels, which may indicate that some heifers are being held back for breeding.

All the economic signals are in place for cow/calf producers to start expanding their herds. The $1.80 for 500 lbs. steer calf is a pretty strong signal; heifer calves are about a dime lower than their steer mates. Although selling heifer calves at this price level is fairly tempting instead of waiting two years to get a payday from holding them over as replacement heifers. Even if you want to purchase your replacements, somebody has to breed them. And you’ll pay a fairly handsome price for bred heifers this fall. Commercial bred heifers are trading between $1,200-1,600 per head at the auction markets.

Nonetheless, we’re short of cows. CattleFax expects to see cow slaughter down 4 percent for the year. We’re currently running 1 percent behind last year’s pace so they’re not expecting a very large fall cull cow run. This should start to put pressure on the groundbeef market; half of our beef production is consumed as ground-beef.

The market for ninety-percent lean beef is currently $207.92 and the market for 50 percent trim is $101.39. The cow beef cutout value is at $163.42. The wholesale value for cow beef tenderloins is at $4.26 lbs. These components for the ground beef market and the cow beef whole muscle cuts are already quite high.

Add into the mix that our lean beef imports are also running behind year ago levels, and this will also compound the ground beef markets. Australia and New Zealand are currently in a drought and liquidating cow herds, which is reducing import supplies as well. And China has been importing beef from those two countries at a rapid pace, so lean ground beef supplies will be very short for the foreseeable future.

Overall, there is just a shortage of beef worldwide, and we need to produce it. U.S. beef exports are still on fire with the latest July report showing a 14.7 percent increase in beef exports over last year. The market is there. Global and domestic demand is pretty good. We need to simply produce more of it. So hold a few more heifers back and make some good cows out of them. — PETE CROW