Beef Market Advisor

Wednesday, July 03, 2002

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Will Heifer Retention Come This Cycle?

I have written and have spoken a lot about the normal role of heifer retention in the cattle cycle and its impact on cattle prices. The net result of today's heavier carcass weights is that we may have already started the beef expansion phase of the cattle cycle without any extra heifer retention.

Feedlot managers have found that the modern, fast-track cattle can continue to grow economically well beyond normal harvesting weights. For individual feedlots, it make economic sense to keep feeding these fast-track cattle rather than going into the replacement market and refilling their lot with new feeders. Besides, a year's worth of feeder equity losses has reduced bankers interest in financing new sets of cattle.

Nebraska and Oklahoma research studiers are now showing that average daily gain and feed efficiency is not affected by days on feed and that live slaughter weight is linearly related to days on feed. Both studies reviewed concluded it was economically profitable to feed cattle to heavier slaughter weights. Dr. Dillon Fuez, University Of Nebraska, concludes that a mico-macro paradox exists here and what is good for individual cattle feeders reduces, not increased industry profits. Dillon reminds us that output increasing technologies, in industries with in-elastic demand curves, decrease industry profits. Dillon's expected -2.5 to -1.4 price flexibility demonstrates this economic fact.

The major implications of this form of beef supply expansion is that we will not get the normal price-kick experienced from the traditional transfer of heifers from feeding to breeding. This is being done by 1) feeding and slaughtering heifers and 2) by increasing carcass weights. It has been project that the 5 pound trend increase in carcass size growth is equivalent to adding 280,000 additional cows per year. That's equivalent to 2,8 million additional beef cow over the last decade. The real question is will the U.S. and Canada ranchers re-populate after this drought or not? If carcass sizes continue to grow, maybe not.

It appears like ranchers are now harvesting the genetic seeds sown in the 1970s and 1980s with respect to modern, large, fast-track, large cattle. This is now evident in the Angus industry's genetic base and I believe it is indicitive of the total industry. Fred Knop, Drovers Journal, shared the following genetic information:

Purebred Angus yearling heifers have grown from 621 lbs to 836 lbs over the last 30 years.

Hip heights of these heifers have grown from 40.8 inches to 48.7 inches.

Hip height of Angus bulls grew from 44.0 inches in 1972 to 50.6 inches in 1991.

Larger animals tend to generate larger slaughter carcasses. The long-term trend is 5 pounds per carcass per year. Fred also points out frame size and growth aren't totally synonymous, muscle counts too. A chart showing how carcass size has increased in recent years is available from Harlan at

posted by Dr. Harlan Hughes 7:10 PM [edit]

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Agenda Outline For Illinois Beef Association, Bloomington, Ill, July 22nd Meeting


Harlan Hughes
Professor Emeritus
North Dakota State University

Taking Your Beef Cow Herd Profitably Through The Current Cattle Cycle

I. Introduction
A. Current cattle prices are down considerably from last year. Many beef cow producers have contacted me wondering if the beef price cycle has peaked and we've entered a period of down trending prices. My response is twofold. First, last falls price drop was demand related and the current price drop is supply related.. Secondly, the cattle cycle effect should generate at least 2 or 3 more years of strong cattle prices before the next cattle cycle downturn. The cattle cycle effect hasn't really kicked in yet, but it appears ready to do so as soon as the drought ends.
B. Cattlemen need to study the cattle cycle and know where it is going and when to maximize profits over the next few years. This total IBA session will be devoted to helping beef cow producers take advantage of the good time of the current cattle cycle and to help them prepare for the next downturn in beef prices.

II. First Session Titles
A. Marketing Cattle On An Up Market – 1.5 hours
1. A study of Cattle Cycles and how to make the cattle cycle work for the beef cow producer.
B. Cattle Cycles and Its Impact on Backgrounders and Cattle Feeders – 30 minutes.
1. A look at the impact of cattle cycles on cattle feeders
C. Coffee Break - 30 minutes

III. Second Session
A. Increasing economic efficiency is the key to increasing long-term beef cow profits. And, Integrated Resource Management (IRM) tools and techniques are the avenue to that improved economic efficiency. Economic efficiency leads to increased beef cow profits in the good years and reduced financial stress in tough years. Right now — during the high-price years of this cattle cycle — is when ranchers should work to increase their cowherd's economic efficiency in order to build the financial reserve to carry them through the next set of tough years.
B. Second Session Titles
1. What We Have Learned From 10-Years of IRM Cost & Return Studies – 45 minutes
2. Benchmarking – A Key Profit Enhancing Management Tool – 45 minutes
IV. Questions and Answers

posted by Dr. Harlan Hughes 6:03 PM [edit]

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