Will the Beef Herd Rebuild?

Up until the break of the new century the U.S. beef industry could set its watch on a 10 year market cycle. In other words, producers could expect market lows to be 10 years following the previous market highs. Such things as the bovine spongiform encephalopathy (BSE), major drought throughout large sections of the Midwest, competition from rising crop values and an aging group of ranchers have all contributed to a major reduction in the number of mama cows across our nation.

USDA data from 2011 indicates that among the 654,000 cattle farms in the county, 37 percent are operated by producers 65 years of age or older and another 29 percent are operated by producers between the ages of 55-64. Together, these two age groups operate 64 percent of land used for cattle production. This includes 118.4 million acres by the 65+ producers, 66 percent of which are the full owners of their farms. In many cases, there are not family heirs interested or able to take over the operation, according to Derrell Peel, Oklahoma State University Extension Livestock Marketing Specialist.

As characteristic in agriculture, ranchers just don’t suddenly retire. They tend to leave the industry over a period; sometimes it takes many years to exit. During these “decision” years they tend to cut back on the intensity of their ranch operation. This might mean reducing cattle numbers or changing the ranch to one requiring less labor. A friend of mine in South Dakota tells me of ranchers affected by the severe drought of 2012 who have liquidated their cow herd with intentions of going to a summer yearling grazing period. The latest USDA data confirms that cattle producers over 65 years of age have a per farm value of production that is 43 percent less compared to the average value of production on all cattle farms.

Yes, there are some well-educated young people aspiring to make cattle production a career but they face the daunting task of making a down payment in an industry which has always required a lot of capital. Currently asset value, land-cows-equipment, are at record highs. For these young enthusiasts, asset ownership may have to give way to asset control. However, for this to occur, those who control the assets will have to consider leasing or other business arrangements if a new generation is to enter the industry.

While the aged cattlemen are slowly exiting and the eager youth are trying to find an opening into the industry, many in the middle age group are trying to survive the widespread drought by down-sizing with intention of off-setting high feed and input cost of the past two years. For some, re-building the cow herd will be difficult because of high cow and heifer values.

The widespread national drought will ease and eventually yield to plentiful plant production. As this occurs, there will be a gradual increase in the U.S. cow numbers. But with increased domestic and international demand for quality beef, rebuilding the nation’s cow herd may be at the pace of a slow walk. For the long term health of the industry, I hope it can find ways for the new generation to enter. These are the folks who can make U.S. beef production highly efficient.