ANOTHER YEAR WITH NO HERD EXPANSION
By Don Close , Terrain Executive Head Emeritus
There are no signs of beef cow herd expansion on the horizon . The quarterly breakdown of steers and heifers on feed within the USDA ’ s October Cattle on Feed report showed the percentage of heifers in the mix was unchanged from a year before at 39.66 %. That is marginally higher than the last update in July . Although the percentage of heifers on feed was close to expectations , market participants viewed it as disappointing because there had been some anecdotal claims and conversations of heifers being retained for the breeding herd . A Mix of Unfavorable Factors
The prospects for buyer demand for beef replacement heifers have become even more complicated . First , the rapid erosion of pasture and range conditions since midsummer has dampened producer confidence in having pastures with the capacity to carry the additional head count . At the end of October , the Pasture and Range Conditions report showed 53 % of U . S . areas were rated in poor to very poor condition , compared with 37 % at the end of October 2023 .
Winter wheat grazing prospects have also been deplorable because of the dry late-fall conditions that have delayed planting . As of the end of October , emergence of winter wheat was only 56 %.
Better moisture conditions during the spring and early summer allowed for aggressive hay baling . While increased hay supplies are encouraging , they are not a replacement for having adequate grazing opportunities .
Interest costs and interest rate risk continue to be a factor in the slow-to-nonexistent herd rebuilding . Despite the Federal Reserve ’ s 50-basis point interest rate cut in September , followed by a 25-basis point cut in November , signals don ’ t indicate a fast fall in rates . Long-term bond prices suggest the bond market
thinks the Fed overreacted with the initial 50-basis point cut . So , Where Do We Go from Here ?
Through the fall , calf prices have improved from a summer slump , making a solid recovery trading at $ 3.50 / cwt . At the end of October , the CME Feeder Cattle Index was solidly trading at $ 2.50 / cwt .
In both 2022 and 2023 , heifers made up just under 40 % of cattle on feed at year ’ s end . From what we have seen for heifer retention year to date , especially in October , we are not expecting any meaningful decline in the heifer percentage at the end of the year .
With no visible signs of retention in 2024 , it puts pressure on how this year ’ s heifer calves will be managed and traded . For the fall shipping season so far , it appears there could be a slight effort toward heifer retention . Heifers could fall under a two-way category where they aren ’ t yet in a full heifer development program but instead on hold while producers gain insight into weather prospects , interest rates and prices . If weather conditions don ’ t improve soon , the heifers will likely be sold later as feeder cattle .
If the percentage of heifers on feed doesn ’ t decline sharply to below 36 % during the first half of 2025 , it will be increasingly safe to assume that rebuilding will be kicked down the road another year .
In our view , the market outlook is solid given beef demand , and herd expansion will occur . It is just a matter of pasture and range conditions improving and calf prices reaching a certain level to trigger expansion .
Terrain is a team of economists who provide expert analysis to the customers of American AgCredit , Farm Credit Services of America and Frontier Farm Credit . Learn more at Terrainag . com .
20 NATIONAL CATTLEMEN www . NCBA . org