KLA: Mark Concerned With Implications Of Female Liquidation

While cattle inventories at historically small levels are mostly responsible for today’s bullish cattle market, at least one economist is worried about the long term implications this trend will have on industry structure. University of Nebraska Ag Economics Professor Darrell Mark said continued liquidation of the cowherd will lead to fewer feedyards, packers and cow-calf producers.

In an attempt to satisfy the short-run demand for beef with a smaller cattle inventory, the industry has been harvesting more females. Mark said the problem with trying to maintain short-term beef production by elevating both cow and fed heifer slaughter is that it leaves fewer females in the breeding herd and reduces future beef output. He points to the female-to-steer slaughter ratio, which currently is at or above 100%. The ratio has to be closer to 90% before the beef cow inventory can begin to increase.

Mark also expressed concern from a demand standpoint. Commercial beef production is forecast to decline this year and next, while pork and poultry supplies are expected to be steady to slightly higher. As less beef is produced, consumers will eat less and prices will rise. He said higher beef prices could cause consumers to shift from beef to poultry.

“The biggest ‘if’ in this scenario is whether or not consumers will return to higher levels of beef consumption once retail supplies of beef begin growing, which will be several years down the road,” said Mark. “If they don’t, the size of our industry could forever be reduced unless exports grow even more rapidly than they have been.”

Mark suggested cow-calf producers create heifer development budgets and weigh those returns against potential feeding profits. For the cattle feeders, he said most will have to deal with tighter supplies by planning to operate at a lower capacity.

For more information visit www.kla.org.

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