December 12, 2002

Market Advisor: What Happened to the Cattle Cycle?

By Tim Petry, Livestock Economist
NDSU Extension Service

Most cattle cycles are 10 years long, but the current cycle has lasted 12 years and may go longer. Why is this cycle longer than normal?

Cattle cycles have been measured for more than 100 years. There are actually three components to a cycle: the cattle inventory cycle, the beef production cycle and the cattle price cycle.

Cattle inventory cycles are periods of increasing numbers called accumulation phases and periods of decreasing numbers, called liquidation phases. Beef production cycles lag inventory cycles by about a year, because to liquidate numbers more cattle must be slaughtered, and to accumulate numbers fewer cattle are slaughtered. Price cycles are typified by periods of increasing prices called increasing phases, and decreasing prices, called decreasing phases. Cattle price cycles tend to be opposite of beef production cycles.

The two factors that most affect the length of cattle cycles are the reproductive biology of cattle and weather. Cattle inventory cycles typically experience six- to eight-year accumulation phases and three- to four-year liquidation phases. So, a typical cycle would be about 10 years in length.

The accumulation phases are longer because of the relatively long time, compared to other livestock species, that it takes to rebuild herds. A heifer calf retained in the fall for breeding purposes will be bred the following summer, have a calf the next spring, and that calf will not reach slaughter weight and be reflected in the market until the following year. Because this reproductive biology cannot be changed given current technology, cattle cycles will likely continue to occur.

Years ending in 5 and 6 are usually times when cattle numbers and production are high and prices are low. That has been the case for many decades before and including 1975-76, 1985-86 and 1995-96.

The current cattle inventory cycle began in 1990 with the accumulation phase lasting six years until 1996, just as expected. The resulting cyclically low prices in 1995-96 caused producers to liquidate herds for four years through 1999, again as expected for the 10-year cycle.

However, in spite of relatively favorable prices in 2000 and the first three quarters of 2001, when rebuilding would normally have taken place, liquidation of cows continued. By Jan.1, 2002, when USDA tabulates cattle numbers, cyclical liquidation had lasted for six years.

This longer-than-normal liquidation has occurred because of abnormally dry weather conditions in much of the cattle-producing area in both the western and southeastern regions of the United States.

Beef cow numbers actually increased by 4,000 head in North Dakota in 2001, as expected. However, beef cow numbers declined in neighboring states adversely affected by drought conditions. Montana lost 80,000 cows, followed by Wyoming with a loss of 30,000 cows. South Dakota liquidated 17,000 cows. Beef cow numbers declined by a total of 298,000 head in the United States in 2001. Continued dry weather in 2002 in much of the West, and now including southern North Dakota, will severely limit any herd-rebuilding plans by producers.

The highest prices for feeder cattle usually occur during the early accumulation phase of the cattle inventory cycle, when heifer calves are retained for breeding purposes and fewer cows are sold. Significant improvement in moisture conditions will have to occur in the cattle-producing states for that to happen. Otherwise, weather-induced liquidation will likely continue to occur.

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Source: Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu
Editor: Tom Jirik, (701) 231-9629, tjirik@ndsuext.nodak.edu