Should You Expand Your Beef Operation?

Recent survey shows over half of producers plan to expand herds up to 10%

Published on: Nov 11, 2014

There’s been much talk about the “Perfect Storm” of factors that pushed fed beef prices to all-time record levels – more than $1.60 a pound. Exceptionally tight cattle supplies led the pack, along with surprisingly good consumer demand despite unheard of meat case retail prices.

High pork prices added fuel to the fire, due in part to Porcine Epidemic Diarrhea Virus. Steady feed price declines haven’t hurt beef bottom lines either.

But delayed U.S. beef expansion hasn’t been just about lack of economic incentive. Prolonged and extreme drought in key cow-calf states gave producers no alternative to partial or complete herd liquidation. And, Mother Nature’s “heat” continues to impact how extensive the herd-rebuilding phase will be.

Are you ready yet?

Many producers finally appear to be ready to “hit the gas” and expand. Key points of a recent Beef magazine survey revealed a significant upturn in optimism in expansion plans:

* Almost 52% plan to expand by 1 to 10%; about 19% will expand by 11% or more.

* 84% noted that retaining heifers is their expansion method of choice. About 37% will do so by buying replacements; 13% will sell fewer cull cows.

* Of those retaining heifers, 36% plan to keep more than 20% of their 2014 heifer crop.

Results were based on the responses of about 1,000 cattlemen of a total of 30,000 receiving the survey.

We might surmise they were among the more “bullish” producers. But it’s probably the best measure we have, and certainly supports very strong female demand.

Feed prices via a bin-busting corn crop also feed that optimism. The average cattle producer feels that “it’s finally my turn” for relief from the high feed price crunch.

Given “normal weather” (whatever that is!) over the next five years, forecasters see corn staying in the low $3 area with dips to the high $2’s. How long has it been since we’ve seen corn under $3?

Proceed with caution

Like all other segments of the beef market, the female market has been red-hot and steadily heating. Bred heifer prices have averaged $1,800 or more. Cows with calves at side are easily in the $2,000 to $2,500 range.

Clearly, caution must be exercised. With a strong demand for anything that has, will have, or could have a calf, it’s important to not get sucked in to paying too much for too little.

That female replacement will have a real impact on your overall herd performance for years to come. So choose wisely.

One has to wonder how many cattlemen will end up regretting the decision to expand by selling fewer cull cows. Relaxing your normal standards for keeping cows in the herd probably isn’t a great decision in the long run!

Bottom line: We have at least a five-year “window of opportunity” ahead for cow-calf expansion. Strong cattle prices combined with markedly lower feed prices are a tough combination to beat. But pick your expansion plan carefully and resist the urge to add females that don’t fit your operation.

Harpster is a beef producer and retired Penn State University animal scientist.

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