August 6, 2004 | By: Aimee Heald-Nielson
LEXINGTON, Ky.

In a typical cattle cycle, high prices lead to herd expansion which causes prices to decline over two or three years. But, University of Kentucky Extension livestock marketing associate Kenny Burdine believes the current cycle may not be typical.

“The supply of beef may stay tight relative to demand, keeping prices at high and profitable levels for a long enough time to justify a 10-year investment in larger cow herds,” he said. 

During the past three years, consumer demand for beef has been increasing. That demand has been a key factor in the profitable prices farmers have been getting for their calves.

“Kentucky is one of the largest cattle states in the United States,” Burdine said. “We have the largest number of beef cattle of any state east of the Mississippi River. So, increased demand can largely affect how our producers structure their herds.”

Burdine was quick to point out that supply also is a key factor. The supply of calves on the market depends on the number of brood cows and producers’ decisions about keeping or selling.

“Often when the price outlook is good, farmers keep heifers to breed instead of taking them to the stockyard,” he said. “In the short run, this reduces beef supplies and actually leads to price increases. But eventually, the larger number of cows produces more beef and prices decline – that is the typical cattle cycle, but there is evidence this current market may be different.”

Recently the U.S. Department of Agriculture released its mid-year cattle report. The report showed little change in cattle numbers. The total U.S. herd declined by less than 1 percent to about 104 million head. The number of beef cows stayed about the same at 33.5 million.

“One of the key indicators of expansion is the number of heifers kept for beef cow replacements,” Burdine said. “So the fact that the number of beef replacement heifers increased by 4 percent may be a warning indicator of larger beef supplies ahead.”

Even with these indicators, it appears most herd managers are taking a conservative approach and holding numbers steady. With historically high prices, many producers are cashing in on the opportunities of the present market.

“When all the factors are considered together, the bottom line is that there is little evidence that U.S. beef supplies are expanding,” Burdine said. “The long-run outlook, though subject to many market risks, remains very positive.”

Contact: 

Writer: Aimee D. Nielson 859-257-4736, ext. 267

Source: Kenny Burdine 859-257-7272, ext. 229