Still Waiting

A question being asked repeatedly in the cattle sector is when cow-calf producers will begin to rebuild herds. Beef cow numbers have been trending lower in recent years due to drought, tight feedstuff supplies, and increased costs. On January 1, Nebraska's herd was down 17% from 2019, or over 300,000 cows, and was the smallest since 1963. It marked the fifth consecutive year cow numbers declined.

A smaller herd has led to higher cattle prices. In fact, prices touched record highs earlier this year before softening in recent months. Higher prices should mean improved profits for cow-calf operators. Some estimates have suggested returns could reach $600 per cow this year. Better profits should incent producers to rebuild herds. Indicators, though, show herd rebuilding nationally has not begun in earnest. However, herd rebuilding may have started in Nebraska. Replacement heifers in Nebraska at the beginning of the year numbered 30,000 head more, up 10%, compared to the year prior. The growth was the largest in the nation (Figure 2).

FIGURE 2. HEIFERS HELD FOR REPLACEMENT IN NEBRASKA, 1990-2024

Source: USDA National Agricultural Statistics Service

Derrell Peel, a livestock economist with Oklahoma State University, notes herd expansion involves reduced cow culling and increased heifer retention. According to Peel, beef cow slaughter as a percentage of total slaughter is highly correlated with the annual herd culling rate.As such, a 12-month moving average of this percentage can provide hints of the level of beef cow herd culling. The blue line in Figure 3, created by Peel, shows this 12-month moving average and indicates beef cow slaughter is declining this year. But, based on past cycles, has not reached a bottom to indicate herd expansion. Figure 3 also shows a 12-month moving average of heifer slaughter as a percentage of total cattle slaughter. Heifer slaughter decreases when heifer retention increases. This year the 12-month moving average has not decreased at all. Again, based on past cycles, suggesting herd expansion has not begun.

FIGURE 3. BEEF COW & HEIFER SLAUGHTER AS A % OF TOTAL SLAUGHTER (12-MONTH AVG.)

Source: Derrell S. Peel, Extension Livestock Marketing Specialist, Cow-Calf Corner, Oklahoma State University, September 30, 2024.

Both indicators Peel uses to gauge herd rebuilding suggest a minimal rebuilding. As a result, Peel believes the nation's beef cow herd will be smaller on January 1 the next time the USDA conducts an inventory of the herd.This begs the question as to why producers are not responding to higher cattle prices and improved profits to rebuild herds. Perhaps lingering drought, higher interest rates, or general economic uncertainty are keeping producers cautious regarding expansion. Regardless of the reason, the lack of expansion points to fewer cows, fewer calves, higher cattle prices, and lower beef production in 2025.