Expansion Decisions For Beef Producers

Past history says that when the national beef herd shrinks, calf prices go up, and the herd begins expanding again, but in this week’s From The Ground Up, Joe Brown tells us there are other factors in the mix currently that could keep that from happening.

"One thing that I think we expect with fewer cow numbers and fewer calves is some higher prices too. I certainly expect to see higher calf prices over the next couple of years."

David Anderson is a livestock and food marketing economist with Texas Agrilfe Extension.

"All of our costs are higher, and I don’t know that the economic signal of those higher prices is enough to get producers nationwide to expand their herds. I think we’re already built-in to keep shrinking the herd for another year or two."

So when does a producer decide to restock his herd?

"Is this another short-term wet period like we had in the spring of 2007, followed by a couple of more years of drought on both ends of it, and so there is some waiting to see."

Anderson pointed out that a drought can have longer term effects on livestock than it does on crops.

"The effect of that drought on livestock is longer term in that it takes time for range grasses to recover, it reduces their conception rates, in rebreeding you get fewer calves the next year, there’s less weight on them, they’re in poorer condition, really no matter how much you feed it’s very difficult to keep them in condition."

And a weak economy contributes to lower demand for higher-end beef cuts.

"Throughout the meats they trade down is the term you see a lot. Instead of buying steaks, you buy more hamburger, or you switch to pork or poultry that may be cheaper, it’s higher priced than some of those other meats, and so as we look at income problems because of the overall economy, that’s where beef demand has struggled, as people try to save money."

So even if the drought really is over, it appears the fog affecting decision making for beef producers may not lift until the overall economy strengthens. I’m Joe Brown, looking at Brazos Valley agriculture, From The Ground Up.

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