Cattle Herd Growing, Slowly

SAN ANTONIO (DTN) -- After years of steadily declining cattle numbers, cattlemen began looking a little more aggressively at herd rebuilding in 2014 and that appears likely to continue, at least in the short term.

Beef is certainly behind the curve compared to pork and poultry when it comes to raising more animals to meet higher meat demand. Beef production in 2015 is projected to be down 1% in the U.S. while pork is expected to grow 2.4% and poultry could be up 3.7%, according to a forecast by the industry analysis group CattleFax provided at the Cattle Industry Convention on Thursday.

While optimism is higher for cattlemen, there's a little angst that the growing spread in retail prices between beef and competing proteins could hurt beef demand. That isn't necessarily playing out at the moment, but the lack of beef on the market has translated into a windfall in prices throughout the cattle industry. The CattleFax price outlook for 2015 predicts steer prices could be up 6%-6.6%, depending on weight, and fed cattle prices could be up 1.9% for the year.

The hot market, though, is bred heifers or cows, which might average $2,500 a head nationally and see a 12% increase from 2014.

Various USDA numbers provided at the morning CattleFax seminar show producers are trying to hold back some cattle to rebuild the national herd from the lowest levels since the early 1950s. For instance, despite the high prices for cull cows and fed cattle, cow slaughter was down 19% in 2014 and heifer slaughter was down 8%. Those are both key indicators of expansion and signal producers are holding back more heifers.

USDA shows a net 600,000-head increase in beef cows in 2014. The Southern Plains accounted for the bulk of the expansion, adding 473,000 head. Key cow-calf states of Texas, Oklahoma and Missouri all showed higher numbers.

Interviews at the Cattle Industry Convention reflect a high level of optimism about herd expansion. Cody Noble of SEA Cattle Co. outside Ardmore, Okla., said his ranching operation has been rebuilding its herd over the past couple of years. The ranch, which has about 800 cow-calf pairs, is still down about 30% from herd numbers before drought hit in 2011.

"The determining factor going into the future is the weather to see if we can expand even more," Noble said. "The price and the market sure support expansion."

Practically everyone had to cull back their operations in 2011 and 2012, but rains have improved the past two years. Noble said most ranchers in his area of south-central Oklahoma are looking to put more cows on grass.

One problem for producers trying to expand is that bred heifers are extremely popular with other producers. Max Bozeman, a cattleman from Elba, Ala., said he has been trying to build his cow herd over the last few years and also rotate out some older cows for younger replacements. The only thing taxing Bozeman's ability to grow his herd is high demand and prices for heifers. Bozeman had 72 bred heifers last summer that he was planning to calve but ended up selling them because a buyer made an attractive offer of $2,850 each. "A fellow came along and really wanted them, so I let them have them," he said.

Bozeman estimates a high percentage of Southeast producers are trying to hold back heifers, but they are also selling off a fair share of cows and heifers that are moving on to Southern Plains ranches.

Bozeman, a former Alabama Cattlemen's Association president, has about 115 mature breeding cows now, but he also has 101 heifers he is breeding try to grow his herd. "I'm planning on putting them in the herd unless someone comes along who wants them a lot worse than I do," he said.

Ben Neale, a cow-calf producer from Tennessee, is working to develop replacement heifers for his older cows while also concentrating on better genetics to sell bred heifers to other producers.

"We are making greater returns, so if I can still keep my operation the same, I can make my herd younger and bring better genetics in the herd during this time, and at times when it is harder I won't have those same culling pressures others are going to," Neale said. "For a longer viewpoint, I think it's a good time to rebuild."

Neale said he's selling out bred cows older than three years and still getting strong prices for those animals as well.

The limiting factor for Neale is space. He's developing relationships with older cattlemen in his area who may be looking to sell out their herds and retire.

"I'm young with debt, so I have to look at when the risk profile changes in the market and when I need to make payments," he said. "For some of the older demographic around me, I'm trying to approach them to get their ground. When the market price falls, I think some of them may be done with the business."

FACTORS TO CONSIDER

Several seminars at the convention are focused on factors to consider when restocking. F.T. "Ted" McCollum, a beef specialist at Texas A&M Extension in Amarillo, said producers need to consider their objectives when expanding, such as how big they want to go. What are the grazing needs, and what are the resources on the land? That would include factoring in knowledge, labor and finances.

"In the Panhandle, we have folks who are reallocating land, taking it out of crops and put it back into grazing," McCollum said.

The feasibility of adding cows also should be factored on the basis of the total operation, not just on forage needs per acre. Producers should assess forage needs year round and compare that to forage production on the operation for each month. A stock plan must consider all of the stock needs for more cows, including sires.

Moreover, building the forage needs should be considered, whether that translates into adding more perennial and annual grasses, as well as adding fertilizer to grazing land. McCollum said producers often look at the costs of fertilizers, but also should weigh that against the cost of leasing more ground. A pound of nitrogen can add 25-50 pounds of forage, depending on the area of the country. At 47-57 cents a pound, 35 pounds of nitrogen per acre could cost $16-$19.50 an acre, depending on price of the nitrogen. "Can you rent pasture for $16 an acre?" McCollum asked.

McCollum noted producers might need to evaluate areas of their ranch or farm where the cattle are not making an effort to graze and consider what could change that. USDA conservation funds such as the Environmental Quality Incentives Program can help cost-share to suppress or remove brush, distribute water locations and build cross-fencing to improve grazing programs.

Another avenue to consider might be confinements for cow-calf operations. Don Close, vice president of agribusiness research & advisory for Rabo AgriFinance, said producers have a solid foundation for expansion because of beef demand, but many are challenged for land. He recently finished a study looking at the feasibility of hoop buildings for cow-calf producers. Close said such buildings could work well for producers in the Midwest, for instance, who want to develop a cattle operation without taking a lot of land out of crops.

"We've got a very solid foundation for a turnaround in the cattle numbers with the (USDA) report that was released last Friday, but given the challenges and the barriers because of capital requirements or access to land -- certainly for the younger producers -- any vehicle that we can come up with to assist getting new producers into the business are areas that need to be explored," Close said.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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