Challenges Prevent Herd Growth

REDFIELD, Iowa (DTN) -- Many factors have led to the United States seeing the smallest cowherd since 1961 and ongoing drought along with high prices are preventing producers from expanding the herd in 2024.

As of Jan. 1, 2024, the cowherd was estimated at 28.233 million head and according to Rabobank, the forecast calls for an additional decline to 27.9 million head for 2025.

"The main reason for the decline into Jan. 1, 2025, is that 2024 heifer retention remains lackluster. This trend has been in place since last year's fall run," said Chase Beisly, animal protein analyst for Rabobank. "Since October 2023, the USDA has reported that 42% of all feeder cattle and calves sold were heifers. That is higher than last year and the five-year average by nearly 41%."

The April USDA Cattle on Feed report showed feeder heifer and heifer calves account for 4.6 million head, up 1% from 2023. These heifers accounted for 38.5% of the total fed cattle population on feed, which was down 0.2 percentage points from a year ago, according to Beisly. The percentage of heifers in USDA fed cattle slaughter is at 40.4%, which is also down slightly from 2023.

HIGH PRICES PRESSURE REBUILDING

Market prices for cattle have put some pressure on rebuilding the herd as well, along with other challenges. DTN Livestock Market Analyst ShayLe Stewart said the cattle complex's long-term outlook remains both bullish and supportive to cow-calf producers.

"The feeder cattle complex has seen tremendous demand through the early months of 2024. Given that the U.S. beef herd remains at its lowest inventory in over 60 years, feeder cattle demand through the latter half of the year should remain strong as well," Steward said. She noted that in both 2022 and 2023, the feeder cattle market pinned its yearly high in late August/early September, and as of early May, there is a $14 price spread between the May 2024 and August 2024 feeder cattle contracts.

It's common to see similar trends nearly every year. These seasonal trends are a reliable tool in the cattle industry, but in years like this, the market could see abnormal buying/selling behaviors from both cattlemen and feedlots alike, Stewart said.

"The market is currently painting a picture that would align with its typical seasonal behavior, but one should also be aware that feedlot buyers and order buyers were more aggressive in the first quarter of 2024 than normal, and to date, feeder cattle imports from Canada are up 8.9% compared to a year ago, and feeder cattle imports are currently up 12% from Mexico," she added.

HEIFER RETENTION NOT INCREASING

Beisly said it is important to note the percentage of heifers being sold, placed on feed and slaughtered is likely elevated with the use of more sexed semen in U.S. dairy herds as the production of beef-dairy cross cattle has grown.

"Many experts suggest those percentages could be inflated compared to prior history by around 1.5 percentage points. However, the trend in beef heifer retention remains softer," he said.

Stewart said the heifer retention and deciphering when the beef cowherd could begin to build back remains a focal point for all cattle market enthusiasts.

Rabobank analysts said USDA reported 4.9 million beef replacement heifers were on operations to start 2024, which is 71,000 head less than 2023 and the smallest reported number since 1950. Beisly said with beef cows still being culled at an expected rate of 10.7% in 2023, beef cow herd growth is not expected until 2026 at the earliest. Even then, Rabobank expects it to be very modest growth compared to what the industry experienced from 2013 into 2014.

"The two main factors that dictate whether cattlemen will continue to liquidate their herds are profitability and access to cheap feed. And with inflation remaining problematic throughout our economy and interest rates high compared to recent years, input costs and any overhead expenses are quickly consuming any income generated on cow-calf operations," Stewart said.

WEATHER PLAYS A PART IN HERD EXPANSION

A lot of cattle herd liquidation took place in fall 2022 when drought in the western Plains made life difficult for cattle producers in need of water, hay and corn for livestock, according to DTN Lead Analyst Todd Hultman.

"All three had become scarce and expensive. Now, in spring of 2024, there are still some drought concerns in the western Plains, but the situation is not as severe, thanks to better precipitation over the winter and recent months and a record corn harvest in 2023," he said. Spot corn prices are in the low $4s and aren't likely to change much unless adverse weather hits in 2024.

"The more widespread availability of water, green pastures and cheaper sources of feed are helpful conditions for encouraging the expansion of cattle numbers, but there has been no significant sign yet of beef cows being held back from market for expansion to take place," Hultman added.

Ongoing drought throughout cattle country has seen some relief, but pasture recovery in those areas has held off herd expansion.

DTN Ag Meteorologist John Baranick said the drought across the South and Southeast has been all but eliminated due to very active winter and spring seasons, which has made those areas a bit too wet.

"The summer season is more variable and the building La Nina conditions in the Pacific Ocean enhance the potential for tropical storms to come barreling through the region as well. So, overall, these areas are in good shape with possible areas of drought developing through the summer," he said.

The switch from El Nino to La Nina won't be immediate and likely won't be extreme, but when the transition does happen, an upper-level ridge usually takes shape which means hot and dry conditions.

"Unfortunately, the DTN forecast has this ridge being somewhat permanent across the Western Corn Belt and High Plains this summer. That means hotter and drier conditions are favored generally west of Iowa," Baranick said. "This could either increase drought coverage or make the existing drought worse."

Drought could lead to more liquidation of an already small cowherd. Steward said that with a hot and dry weather outlook expected for the upcoming summer, she doesn't believe most cattlemen are going to keep heifers for replacements when the market is offering exceptionally high prices for them as feeder cattle.

"Even with high prices, it's not likely that heifers are retained until cattlemen see returns that exceed operational costs," Stewart said. The focus for cattle producers moving forward will be adapting to the challenges to make profits and produce a product demanded by consumers.

Jennifer Carrico can be reached at Jennifer.carrico@dtn.com

Follow her on social platform X @JennCattleGal

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