Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 1/3/11

With feeder cattle prices near record levels at the end of 2010, market incentives to rebuild critically low U.S. cattle numbers are increasing, but some mitigating factors may mean prices must go even higher before meaningful rebuild can occur, according to Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel.

In an outlook report, Peel noted volatile input costs and regional issues, such as shipping costs in the Southeast, could make producers pause before retaining heifers to rebuild.

Broader changes in agricultural land use also increase the difficulty of rebuilding the beef cow herd in many regions. Increased demand for crop production means that improved pasture areas compete directly with crops for land use and indirectly for the inputs needed for crop or forage production, Peel explained.

In general, regions from the eastern Great Plains eastward are most affected by direct and indirect competition from crop production. Peel said beef herd expansion incentives will be higher in the western Great Plains and Rocky Mountain regions compared to the Midwest and Southeast.

Another unique feature of the current situation is the competing demands for both cow-calf and stocker production leading to increased demand for forage. In addition to the need to increase cattle numbers, there is an ongoing need to reemphasize forage based production of feeder animals in response to permanently higher grain prices.

A final factor that is often mentioned to me is the demographics of cattle producers. The average age of cattle producers continues to increase and, for many older producers, there may be little interest in expanding cattle numbers regardless of incentives.

“I am confident the market will provide the necessary incentives to rebuild the beef cow herd to meet market needs. However, I am not sure the current price levels are yet sufficient to ensure herd rebuilding,” Peel concluded. “I suspect higher prices will yet be needed to provide the profitability and expectations necessary to retain enough heifers in enough regions to rebuild cattle numbers.”

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