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Rebuilding the U.S. Cow Herd Won't Be Easy, Derrell Peel Says

The numbers are now in and they show a continued decline in the number of cattle in the U.S. The USDA's Cattle Inventory report showed 89.3 million head of cattle in the U.S. That's down two percent from one year ago. Beef cow numbers are off three percent from last year, down to 29.2 million head.


Oklahoma State University Extension Livestock Market Economist Dr. Derrell Peel, says with those kind of numbers and with drought looming for another year, rebuilding the cow herd is not going to be easy.


"It's increasingly difficult because of the hole that we're in. And that is the predicament. If it starts to rain and we start trying to do that process in 2013, or if we don't, or whenever we do it, it's increasingly difficult. We're going to have to have an even more pronounced trade-off in the short run between trying to maintain total beef production in an era where we don't have enough cattle to do that and still hold back enough heifers. It suggests that if we don't rebuild, beef production's going to fall and if we do rebuild, beef production's going to fall even more in the short run and we'll see a very pronounced trade-off. It will be a tricky dance. I think what it means more than anything is that it's a slow process. I think it limits our ability on how much we can grow not only in the first couple of years, but really over probably a three- to five-year period.   It's a relatively slow process."


Of course, tighter supplies means higher prices for consumers and, at some point, consumers will push back. Peel says we may already be at that point.


"I think there's already some push back. We've seen a bit of a ceiling in terms of boxed beef prices. All through 2012, repeatedly during that year, when we saw choice boxed beef push up against that $2 a pound mark it was not able to break through that. I think we will break through it, but there will increasingly be trade-offs. Of course, we won't have as much meat so folks won't be needing to eat as much meat, but the price pressure will be very pronounced.


"I don't think, in total, it will mean people will quite eating beef, but I think what we really don't know is how it will change the mix of products and how people will adapt to that environment. So there are certainly some question marks there. I do think we'll continue to ratchet up these prices, but that will continue to be a limit relative to the price pressure that's there from the supply side. So, what it means is that the margin particularly at the feedlot and packer levels will continue to be squeezed in a very unrelenting way, I think, as we go forward."


In the midst of these pressures, the Japanese have recently announced they are opening their markets further to U.S. beef.    Peel says that is a positive development over the long haul, but in the short term it doesn't mean that much.


"I don't think that change in the rule will have a really dramatic immediate impact. I think it's very important over the long term to support continued growth in that Japanese market. But, for all the reasons we've talked about, in the short run we don't have a huge amount of supplies and it's going to be fairly expensive so it's going to limit how much we can really capitalize on that in the very short run."


The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.



   

   

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