Eyes on expansion: Upper Midwest looks to increase beef cow numbers, but challenges remain
CLIFFORD — The delivery went smoothly, and both mother and newly born bull calf are doing well. The cow, maternal instincts on overdrive, licks the calf fervently. Her son, ungainly but determined, tries to struggle to his feet in the straw-covered pen.
Kevin Elliott, watching from just outside the pen, smiles at the sight.
“I really like this time of year, seeing them take that first gasp of life,” he said.
What’s happening at the Elliott ranch near Clifford is happening at ranches across America this spring: A new batch of calves is coming into the world, and ranchers are working diligently to keep their animals safe and healthy.
But the Elliott ranch differs from many ranches nationwide: It’s adding beef cows at a time when U.S. beef cow numbers have fallen to their lowest levels since 1962.
The most recent annual decline nationally — from 29.3 million on Jan. 1, 2013, to 29 million on Jan. 1, 2014 — comes despite record-high beef prices and lower corn prices that, at least in theory, should encourage ranchers to increase their herds.
The mindset is that high beef prices and lower feed costs will cause producers to hold back heifers for slaughter, with those young females producing many calves of their own to sell over time.
Beef prices are expected to remain high for the next few years, further increasing incentive to expand herds.
North Dakota ranchers are putting theory into practice. The number of beef cows in the state rose from 922,000 in early January 2013 to 943,000 in early January 2014.
To be sure, as Jason Zahn, a Towner rancher and president of the state Stockmen’s Association, notes, it’s only a 2 percent increase, a relatively modest rise.
Even so, it contrasts noticeably with the national decline and state-level declines in beef cattle numbers in South Dakota, Minnesota and Montana. What’s different about North Dakota?
Better weather and more grass and hay. North Dakota avoided the worst of the drought that hammered grass and hay production in the three adjacent states. It also missed the worst of the disastrous October 2013 blizzard that killed thousands of cattle in South Dakota.
But cattle producers and others say Montana, South Dakota and Minnesota, as well as the nation overall, are setting the stage for herd expansion.
“It comes down to record high prices and moisture conditions. When those two things line up, we’re going to expand. Right now, we think we’re in the process of doing that,” said Kevin Good, a senior analyst with CattleFax, a cattle market and research information service based in Englewood, Colo.
Some parts of the country remain dry, however, which will slow overall expansion of the beef herd, he said.
Eighty-five percent of Texas is abnormally dry or in drought, according to the U.S. Drought Monitor.
The state leads the nation with 3.9 million beef cows and accounts for about 13 percent of U.S. beef cows.
Demand, market share
Potential expansion of the U.S. beef herd has important consequences, both short- and long-term, for individual producers. It also will affect the cattle industry’s ability to produce beef at a price and quantity that consumers want.
USDA numbers show that beef prices in February, the most recent month for which data is available, continued to rise. The average price of fresh beef overall was $5.28 per pound, up from $4.91 per pound a year ago, $4.63 per pound two years ago and $3.60 per pound a decade ago.
Cattle prices have risen sharply, too. One example: 500- to 600-pound steers sold at auction in North Dakota in the last week of March averaged $217.50 per hundredweight. Steers in that category averaged $160.31 per hundredweight in the same week of 2013.
Consumer demand for beef remains strong, despite the higher prices, industry officials say.
But it’s important to distinguish between demand and market share, Good said.
Because of higher beef prices, some consumers are switching to other meats, including poultry, causing beef to lose market share.
Fewer beef cows mean less beef for consumers to buy. Higher beef prices ration the smaller supply of it.
“That’s how markets work,” Good said.
U.S. commercial beef output in 2014 will drop 5.4 percent to 24.32 billion pounds, the least since 1994, the U.S. government forecasts.
Less beef will continue to push up its price, as the market rations the even-smaller supply, Good said.
One thing to remember about herd expansion:
If cattle producers do hold back more heifers, U.S. beef supplies will continue to decline temporarily, putting more upward pressure on prices. That pressure won’t end until calves from held-back heifers are ready for slaughter.
Beef cattle basics
The biology of beef cattle prevents a quick build-up of U.S. beef supplies.
“It takes time,” said Tim Petry, livestock marketing specialist with the North Dakota State University Extension Service.
Say a rancher hangs on to a female calf born this spring. She will be bred next summer and have her first calf in two years. Another year will go by before that calf is slaughtered.
So, roughly three years pass from when a rancher holds back a new female calf until additional beef from its first offspring is available to consumers. Historically, the long build-up has played a big role in what’s called the beef cattle cycle, or the roughly 10-year period in which the U.S. beef herd expands and contracts in response to changes in beef prices and profitability.
Views differ on how closely the current cattle cycle will resemble past cycles. But everyone agrees that beef cattle’s biology slows herd expansion.
Roadblocks to expansion
Ranchers and industry officials in Minnesota, South Dakota and Montana say some producers in the three states already have expanded their herds. Other producers have had to cut back because of bad weather, however, more than offsetting expansion in some herds. Now, though, ranchers and officials in the three states see encouraging signs of a broad expansion.
“The pieces seem to be coming together,” said Rachel Endecott, Montana State University Extension beef cattle specialist.
But there are roadblocks that likely will slow or limit herd expansion:
- Many area ranchers are in their late 50s and 60s, an age at which increasing their herds becomes less attractive. The appeal declines even more because most, or even all, of the additional cows would be heifers, which generally have more calving difficulties than older cows.
“Some guys are getting to the age where they don’t want to be calving out a bunch of heifers,” said Bob Fortune, a Belvidere, S.D., rancher and president of the state Stockgrowers Association. He also said he thinks the state’s beef herd will expand.
- High crop prices have caused some pasture and hay land to be converted to crop land.
Poorer access to grass and hay will limit some producers’ ability to expand, said John Chute, an Aitkin, Minn., cattle producer.
But he thinks Minnesota overall is likely to add beef cattle.
- Current prices are so high that they encourage ranchers to sell cattle now, at an attractive profit, instead of holding back the animals for expansion.
“I hear some producers saying, ‘I can’t afford to pass up selling at these prices,’” Chute said.
That’s especially true for producers who struggled in recent years to make money because of drought or high feed prices or both.
Imagine you’re a beef cattle producer deciding whether to hold back a heifer.
Do you sell the animal now and take a sure profit? Or do you keep it and wait several years to begin selling calves at what could be higher or lower prices?
The answer, for many ranchers, will depend on their age, reliable access to hay and pasture, and whether they’ve made money the past few years, officials say.
Kevin Elliott is part of Tri E Simmentals of Clifford. The operation includes his parents, Mike and Patty; Kevin and his wife, Stacy, and their children, McKenzie, Keegan and Konner; and Kurt (Kevin’s brother) his wife, Cheryle, and their children, Chase, Dani and Levi.
The extended Elliott family runs a cow-calf operation and 3,000-head cattle feedlot. It also sell bulls and raises grain.
About 270 cows are calving this spring in the cow-calf operation. That’s about 70 more than a few years ago.
“We’re growing some,” Kevin Elliott said.
Will the additional cattle be profitable?
“We sure hope so,” he said. “But expenses have risen, too. You’ve got to watch your expenses. If something doesn’t pay for itself, you can’t be doing it for very long.”
Many of the additional cows were bought by Chase Elliott, a junior at nearby Mayville State University.
“It’s the next generation adding on to the herd,” Kevin Elliott said.
Chase Elliott, who was at college when Agweek visited his family’s ranch, is busy with his studies and a college baseball career.
But he returns regularly to the ranch during calving season and wants to join the operation full-time after college graduation.
“I just enjoy the whole process” of the cattle operation, he said.
Like his uncle, he mentions the satisfaction of watching cattle take their first breath of life.
The Elliotts are about three-quarters done with calving this year. The blizzard that roared through the region in late March had virtually no effect on the animals.
“They had shelter and came through it fine,” Kevin Elliott said.
Calving was going well before the blizzard, too.
Adding the 70 cows to the cow-calf operation “has caused our facilities to get a little cramped. But it’s working pretty good,” he said.
He shrugs when asked if more expansion is possible.
“That depends on what the market does. It (further expansion) would have to be economical,” he said.
“We enjoy having cattle. But we can’t be expanding unless it makes sense financially.”