While cattle ranchers breathe a sigh of relief (and sometimes, celebration) over increases in cattle prices, the concern over the decreasing size of America’s cattle herd lingers.
“This is a bad situation for America’s cattle farmers and America because we’re producing 1 billion pounds less beef than we were in this country just a year ago,” John Boyd, Jr., president of the National Black Farmers Association, said Thursday on Fox & Friends First.
According to the U.S. Department of Agriculture, beef cattle inventories have dropped to 28.2 million this year — the lowest since the 1970s and down 2 percent from a year ago. The total U.S. cattle and calf inventory is at its lowest level since 1951.
As the inventory dips, prices across all sectors seem to be on the rise. The positive news is welcome after nearly a decade of lower prices and the most recent years of drought across the central and western U.S.
Last week, Durant Stockyards in Oklahoma reported $4.48 per pound prices on 218-pound bull calves.
Commentators on Durant’s post noted that their sale barn in Central Wisconsin was selling black bottle calves for over $800 per head.
According to the Bureau of Labor Statistics, beef sold for an average of $5 per pound last year. Years of drought, aging producers, and limited retained replacements indicate a tightening beef supply. And, as we all know — as long as beef demand remains high, this tightening supply will likely mean higher prices for cattle and, likely, higher subsequent prices for beef.
“It’s a supply and demand issue,” Wyoming state Rep. Bob Davis told Cowboy State Daily. “Beef is in high demand, but ranchers don’t have the inventory to fill that demand. That’s bringing prices up and determining the price that the processors are willing to pay the ranchers for the beef.”
Beef producers, however, amid celebrations for cattle prices, are meeting forage inventories and prices driven up by droughts. And while a low inventory and high prices might seem like the time to buy, it will take years for producers to build cattle inventories back up.
At best, if producers begin retaining heifers this year, and the weather allows for their retention, the earliest boost the feeder cattle inventory will see will be in 2016.
The question remains, though: will record-high prices bring profitability in the year to come?
Ultimately, cattle producers have little control over the market prices, but they’re responsible for production and the associated costs. The King Ranch Institute reports, “Low-cost producers who optimize production have been, and will continue to be, best positioned to benefit from record high prices.”