Historically high calf prices and improved forage conditions in some key production areas sound like the right ingredients for an expanded U.S. cattle herd. But producers so far have resisted, says Kansas State University (KSU) economist James Mintert. He says rising costs of production for forages and other inputs are curbing producers' interest in growing their herds.
Reduced forage options stemming from several recent years of drought have been largely responsible for holding back beef cow herd expansion, Mintert notes. The weather situation has now improved in some important cattle areas, including Kansas, but worsened in others. Mintert and KSU ag economist Rodney Jones cite recent survey information indicating that lease rates on summer pasture in Kansas have climbed 16% in the past five years. In many cases, rates have increased faster than that, say the economists.
Surging corn prices are another reason cattle producers are reluctant to expand herds, Jones says. "In past years when corn prices have spiked, they would only stay up for a few months at most -- not long enough to influence forage program prices significantly," he states. That situation has changed, with corn prices holding strong because of demand for corn from ethanol producers, livestock feeders and export markets. Corn demand will ultimately impact grazing rates as corn growers are pressured to put pastureland into crop production, and as there is increased demand for forage-based production systems, according to Jones.
In addition to rising costs of feeding cattle, be it on pasture or on feed, cattle producers are also facing higher fuel and utility costs. Based on current data and with no immediate relief in sight for high fuel prices, Jones and Mintert expect little to no expansion of the U.S. cow herd in the near term.