U.S. Cattle Inventory Reaches 73 Year Low

Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist

 

Not many ranchers active today will remember the last time the U.S. cattle industry was this small. On January 1, 2024, the All Cattle and Calves inventory was 87.15 million head, the smallest total inventory since 1951. The All Cattle and Calves inventory is 1.9 percent smaller year over year and is the fifth consecutive year of declining cattle inventories, a total decrease of 7.65 million head or 8.1 percent since the most recent peak in 2019. The 2023 calf crop was 33.6 million head, down 2.5 percent year over year and the smallest calf crop since 2014.

 

The January 1, 2024 beef cow herd inventory was 28.22 million head, down 2.5 percent year over year and a decrease of 3.47 million head or 10.9 percent lower, from the cyclical peak in 2019 (Table 1). The current beef cow inventory is the smallest beef cow herd since 1961. Table 1 shows that the top ten beef cow states, which currently represent 57.3 percent of total beef cows, accounted for 79.4 percent of the year over year decrease in total beef cow numbers and 67.7 percent of the decrease from 2019 to 2024.

 

Table 1. Top Ten Beef Cow States, 2024 Inventory, change from 2023 and 2019.

 

The inventory of beef replacement heifers on January 1, 2024 was 4.86 million head, down 1.4 percent year over year. However, the 2023 beef replacement heifer inventory was revised down by 4.5 percent from the initial value reported one year ago. Thus, the 2024 inventory of beef replacement heifers is down 11.4 percent from the 2022 inventory and is the smallest beef replacement heifer total since 1950. Since 2001, USDA has provided the portion of beef replacement heifers that are expected to calve in the coming year. The current inventory of these bred beef heifers is 3.05 million head, the smallest in the data back to 2001.

 

The estimated supply of feeder cattle outside feedlots is calculated by summing the inventories of other heifers, steers >500 pounds and calves <500 pounds and subtracting the inventory of animals already in feedlots. On January 1, 2024 inventories of other heifers, steers and calves under 500 pounds were all down year over year and feedlot inventories were up 1.6 percent leading to an estimated supply of feeder cattle outside feedlots of 24.2 million head, down 4.2 percent from one year ago. The estimated feeder supply can be consistently calculated back to 1972 and the 2024 value is the smallest in that 53-year period.

 

The smaller cattle inventory is projected to result in a decrease of about five percent in total beef production to roughly 25.5 billion pounds in 2024. That's three times as much beef as was produced in 1951, the last time the total cattle inventory was this small; impressive growth in productivity in the beef cattle industry. Nevertheless, the current ability to produce beef is smaller than market potential today and the industry will look to rebuild numbers and increase beef production when conditions allow.

 

Derrell Peel, OSU Extension livestock marketing specialist, says the recent extreme temperatures in the country could negatively impact prices on SunUp TV January 27, 2024.

 

 

Identifying The Right Bull for Your Operation

Mark Z. Johnson, Oklahoma State University Extension Beef Cattle Breeding Specialist

 

The complexity and dynamics of the beef industry can create financial opportunities for cow-calf operations willing to take a business approach to their decision-making process. The cattle cycle, often referred to in this newsletter, is the topic of my article this week. This cycle is repeated time after time and summarized as follows:

 

This week I address some questions received in response to my two most recent Cow-calf Corner Articles.

 

What is considered a "Good Bull"?

The article outlined the following criteria to meet "Good Bull" status:

• A bull that sells with a registration paper which includes pedigree information and a complete set of genetic values (including EPDs and Bio-economic indices) to be considered in the selection process. * A bull that has passed a Breeding Soundness Exam (BSE) and selling with a breeding soundness warranty (terms will vary).

In addition, it is important to identify the right bull for your operation. Bull selection is not a "one size fits all" proposition. Whether you are buying out of a live auction or private treaty it is critical to access your own unique operation in order to determine the attributes your next bull needs to add value to the calf crop he will sire. This needs to be done before you go bull shopping. There are approximately two dozen genetic values in most beef breeds available to consider, in reality only a few can be prioritized when identifying your next herd sire. Selection pressure and your bull buying budget are both precious commodities, don't squander either on traits that are not economic priorities in your operation.

 

Do You Intend to Keep Daughters to Develop as Herd Replacements?

At this point in the cattle cycle, many producers will be retaining heifers to grow their cowherd. If this pertains to you, the maternal EPDs of your next herd sire will have a long-term economic impact in your operation. The Heifer Pregnancy (HP) EPD is a selection tool to improve fertility in your cow herd. Higher values indicate higher pregnancy rates in replacement heifers during their first breeding season. The Calving Ease Maternal (CEM) EPD is a selection tool to increase the likelihood of unassisted births of the replacement heifers your next herd bull will sire. Milk EPDs indicate the milk level in the form of pounds of calf cows will wean based on the nutrition provided. Higher Milk EPDs not only result in daughters weaning heavier calves but also in higher nutritional requirements in the cow herd so there is an optimum value depending on your production environment. Mature Weight (MW) EPDs indicate the mature size of a bull's daughters. Optimums in mature cow weight also depend on your production environment. Dr. Paul Beck's article in this newsletter on January 29th, 2024 is an excellent summary of the impact of mature cow size. The Sire Search feature on American Angus Association indicates considerable variation in MW EPDs among sires combining better than average genetic values for Calving Ease Direct, Weaning Weight, Yearling Weight, HP, CEM Milk and Marbling.

 

Will You be Using Your Next Bull on Cows or Virgin Heifers?
No one wants to pull calves. That being said, there is an extremely low incidence of dystocia in mature cows. Selection for calving ease bulls in the form of higher Calving Ease Direct (CED) and low Birth Weight (BW) EPDs is a priority when bulls will be used on heifers.

 

What Else Should Be Considered?

• Marketing endpoint of your calf crop should influence selection priorities when bulls are used as terminal sires.
• Your existing cowherd. Breed composition, disposition and body type, mature size, percent calf crop weaned and percent of mature weight weaned all should impact what you prioritize in bull selection.

Summary
Every operation should establish a budget for herd sire purchases. The return on this genetic investment is based on identifying the right bull (or bulls) that offer the best fit for your operation. Over time, 80 - 90% of genetic improvement is the result of sire selection. Herd bulls will either increase or restrict the profit potential of your operation.

 

Dr. Mark Johnson discusses the value of a good bull in 2024 on SunUp TV Cow-Calf Corner January 27, 2024.

 

References:

American Angus Association

 

Are Your Cows Too Large? Cow-Calf Corner Newsletter January 29, 2024.

Dr. Paul Beck. Oklahoma State University Cooperative Extension.

 

 

What are the financial implications of debt-financed heifer purchases?

Eric A. DeVuyst, Professor and Rainbolt Chair of Agricultural Economics, Oklahoma State University

 

December and January precipitation greatly improved soil conditions across much of the US southern plains, including Oklahoma. The US Drought Monitor Oklahoma Drought Monitor showed over 67% of Oklahoma is drought free as of January 25, 2024. Encouragingly, none of the state is in the extreme or exceptional drought. In comparison, just over 2% of the state was drought free in January 2023 with almost 58% of the state in extreme or exceptional drought.

 

With improved soil moisture and ponds refilled, Oklahoma cow-calf producers are looking to restock drought-diminished herds. However, there are reasons for caution before jumping into the heifer replacement market. Heifer prices are high, very high. At OKC on January 30, 625# heifers sold for nearly $238 per cwt, or nearly $1500 per head. There are reports of production sales with bred heifers going for over $2500 per head. These prices make financing of replacements risky for many producers.

 

First, lets consider financial position as measured by current ratio, debt-to-equity (D./E), and debt-to-assets (D/A). These measures help measure a farm's ability to withstand financial shocks. Current ratio is the ratio of current assets to current liabilities. When buying replacement heifers, the producer increases longer-term assets (more breeding stock) while decreasing current assets (cash) and increasing current and longer-term debt. The means the current ratio drops. The producer is less able to generate cash in a timely manner. So, unanticipated expenses (e.g., equipment breakdowns or higher feed bills) or decreased revenues (e.g., disease outbreaks or breeding failure) can put the business in increased financial risk.

The D/E ratio is relative proportion of debt financing to owner financing. The D/A ratio is the percent of the farm's assets "owned" by creditors. Both are important measures of credit reserve. Healthy D/E and D/A ratios (lower values are better) indicate the business can replace longer-term assets (equipment, building, breeding stock) as needed. And healthy ratios indicate the business has a buffer to withstand lower revenue and higher expenses as the firm can borrow against their asset base if necessary.

 

What this means for cow-calf producers is that borrowing to buy replacement heifers increases D/E and D/A, reducing the firm's credit reserve. This reduces the firm's ability replace other longer-term assets as needed and the firm's ability to withstand shocks.

 

Second, lets consider cash flow demands. Debt financing increases cash outflows for debt service. Current replacement heifer notes will not self-liquidate unless a large downpayment is applied, maybe as high 75% down depending on loan terms. So, most producers will need other sources of unencumbered cash inflows to make principal and interest payments. Before committing to buy high-priced replacements, those sources need to be identified.

 

What the current conditions mean for financially struggling producers is that waiting to rebuild herds maybe the best financial option. If excess forage is available by delaying replacement purchases, the producer has options. Calves can be weaned onto grass to add pounds and revenue. Forage can be stockpiled to reduce feeding hay to cows in the fall and winter. Pastures can be leased to neighbors until needed. Hay can be baled and sold. Each of these options may result in healthier (i.e., less risky) financial positions and better cash flow balances.

 

The Cooperative Extension Service from Kansas State University, Oklahoma State University, University of Missouri, and University of Arkansas are providing a joint conference in Missouri and Oklahoma titled the KOMA Beef Cattle Conference. Register online at Missouri Extension.

 

February 2024 Rancher's Thursday Lunchtime Series.