Early signs of heifer retention?

News
Oct 18, 2013
by WLJ

As of Jan. 1, 2013, cow/calf producers were retaining 5.36 million heifers for breeding, which was almost 2 percent more than a year ago. Whether those replacement heifers will translate to an increase in the cow herd by the end of this year, however, is uncertain, said Darrell Mark, Adjunct Professor of Economics at South Dakota State University.

“By late spring, it appeared like some of those heifers were culled from the breeding herd and diverted into feedyards,” Mark said.

Mark added that by the end of summer several factors came together that should improve cow/calf producers’ profitability and incentivize them to increase the size of their herds including: improved pasture and range conditions; increased hay supplies; and a record large corn crop.

Mark expects that, on average, cash returns to cow/calf production could reach $270 per head in 2014, up substantially from this year’s estimated $125 per head return.

He noted that a decline in fed heifer slaughter this year could suggest more heifers are being held for breeding.

“For the first 36 weeks of the year, federally inspected steer slaughter was 1.2 percent lower than a year ago, while heifer slaughter was 1.8 percent lower than in 2012,” he said.

Even with a modest increase in heifer retention, it is difficult to see overall beef cow numbers increase because cow slaughter has been so high in recent years, including parts of 2013. Mark explained that cow slaughter during the first 36 weeks of the year was 0.8 percent higher than a year ago. Beef cow slaughter was lower than in 2012 during January and February this year as producers sought to grow herds, but increased from March through June as drought conditions and high feedstuff prices prevailed. However, since July 1, 2013, beef cow slaughter has dropped nearly 11 percent relative to the same time period in 2012.

“The recent dramatic drop in beef cow slaughter suggests producers are slowing down on culling cows from their herds, which will eventually help stabilize cow numbers,” Mark said.

Mark also examines the price relationship between yearling steers and heifers for a gauge as to whether more heifers are being bought for potential breeding. Using Nebraska 700-800-pound yearling steer and heifer prices as a barometer for national price trends, Mark said a relationship to the next year’s number of heifer replacements can be observed.

“When this ratio increases, yearling heifer prices are increasing relative to yearling steer prices, which can be an indicator of additional heifers being bought for replacements,” he said.

The summer average yearling heifer to steer price ratio stayed between 92 percent and 93 percent from 2009 through 2012, which Mark said led to only modest increases in heifer retention the following Jan. 1.

“These increases in heifer retention were not enough to result in growth in the cow inventory due to accelerated cow cull rates during those years.” he said.

However, in 2013, the summer yearling heifer to steer price ratio increased to 93.6 percent, the highest in five years. While the data on beef heifers being held for replacements won’t be available until late January. 2014, Mark said this does provide some evidence as to an increase in heifers being held as replacements.

“One of the interesting questions to be answered by the next January cattle inventory report is whether beef cow numbers will have increased on January 1, 2014, relative to the beginning of 2013,” he said. “While beef heifer replacements could be 2 to 4 percent higher, it may not be enough to offset the aggressive cow culling earlier this year. It will depend upon how many additional cows are culled this fall. But, given that many of the older cows would have been culled earlier this year or in previous years, cow culling this fall could be lower than normal.”

He added that high feeder cattle prices and cheaper feedstuffs should increase profit opportunities for cow/calf producers in the year ahead.

“So, it is possible that some growth could be noted in the Jan. 1 inventory numbers. It is likely that growth would be fairly modest though. It will take another year before larger growth in the herd is realized. But, at this point, it appears like 2014 and 2015 will be years of larger growth than any in the last cattle inventory cycle,” Mark said. — WLJ

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