NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665
May 4, 2000
The prices producers received for the 1999 calf crop and expected prices for this year's feeder calves are again sending a signal to expand production. As this latest expansion phase gets under way, the number of heifers held for replacement will increase, thereby reducing the number available for feeding out, says an agricultural economist at North Dakota State University. Along with fewer heifers going to market, a reduction in cow culling threatens to tighten slaughter supplies even more.
"Prices will respond further and ensure another round of the cattle cycle," says Dwight Aakre, extension farm management specialist at NDSU. "The driving force behind the changes in the number of beef cows and replacements--the beef factory--is the price for feeder calves received on farms and ranches."
The beef cow inventory in the United States reached a low of 32.9 million head in 1990 before increasing to a cycle peak of 36.1 million head in 1995. Beef cow inventory numbers declined through the remainder of the decade to 33.6 million head on Jan. 1, 2000. Beef heifers weighing more than 500 pounds held for replacement began the decade at 5 million head, peaked at 5.9 million head in 1994 and declined to 4.8 million head on Jan. 1, 2000.
Federally inspected cow slaughter began increasing in 1995 following the severe drop in feeder prices that occurred that year. In response to another large drop in feeder prices in 1996, cow slaughter increased by 16 percent that year, Aakre says. The increased cow slaughter contributed to a severe drop in the cull cow price to $30.80 in North Dakota after averaging $49.91 in 1990.
The feeder-calf price sends delayed a signal to producers either to expand or contract the size of the herd, Aakre explains. The delay is a matter of the biology of beef production. Once producers make the decision to expand, the whole process starts with reducing the cull rate on the existing cow herd, along with increasing retention of the replacement heifers. This action immediately reduces the number of cows slaughtered as well as the number of heifers entering feedlots.
During the last cattle cycle, prices received by North Dakota farmers and ranchers for calves averaged $91 in 1989, according to North Dakota Agricultural Statistics Service. This price series peaked at $103.96 in 1993, then declined by 48 percent to $54.10 in 1996 before beginning the next upswing. A similar price relationship exists throughout the United States, Aakre says.
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Source: Dwight Aakre (701) 231-7378
Editor: Dean Hulse (701) 231-6136
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