Potential for herd expansion is there, but Colorado cattlemen moving forward with caution
March 8, 2014
Terry Walter just had the best production sale he's seen so far in decades of raising cattle in Colorado, and watched his bred heifers go for about $1,000 more than they did last year.
Ray Peterson, who runs about 130 head northeast of Nunn, Colo. — near the Wyoming border — said his father, who passed away 20 years ago, would never believe cattle prices today.
But even with those high prices and with the nationwide number of cattle and calves at a 60-year-plus-low, experts aren't seeing cattlemen rush to expand their herds, saying many are still weary of increasing their numbers after years of drought and record-high hay prices. Although September's heavy rains — that brought historic flooding — gave a boost to pastures in some parts of the state, the devastating dryspell before that is still close in the minds of Colorado's cattlemen.
After years of having to cut down their herds, economists say, many are still selling off animals to build their profit margins.
"We really need a mild year," said Stephen Koontz, an agriculture and resources economist at Colorado State University, who has followed the industry for about 25 years. "I think we'll see some expansion, but it's just not happening yet."
Many are hoping for an expansion of the herd, as the small cattle numbers have put stress on the rest of the beef industry. The tight supply of cattle means good prices for ranchers raising the livestock, but those sharp increases amount to big added costs for feedlots buying the cattle — and coupled with record-high feed prices in recent years, many feedlots were seeing red for long stretches of time.
The tight cattle supply also means tighter profit margins for beef-processors, like JBS USA, which is headquartered in Greeley, and is one of the four main meat packers in the U.S. Less cattle coming through the packing plants means less dollars to cover overhead costs.
And a well-oiled beef industry is critical for Colorado, since the commodity brings in the most bucks for the state's ag industry, which all together makes about a $40 billion impact annually.
According to national numbers released in January, the calf crop, along with the overall number of cattle is continuing to decline.
But the number of heifers kept for production purposes is up.
In Colorado, Jim Robb, director of the Livestock Marketing Information Center in Denver, said the story is similar, with a slight increase in the number of heifers retained.
But heifer retention — a sign of herd-building — isn't up enough to indicate a mass movement to build the number of cattle and calves.
"I think many producers in Colorado are waiting to see what kind of grass conditions emerge, so there's a cautionary effort," Robb said.
That's surely the case for Peterson, who said he's running about half the herd he could after selling off many animals as a result of the 2012 drought. He said he had his herd in good shape before the drought hit, and, when the dryspell came, opted to sell off rather than haul expensive hay to sustain his livestock.
Peterson said he'll consider expanding his herd if spring reveals more good moisture and plentiful pastures.
"[Mother Nature] has the upper hand," he said. "There's just no getting around it."
Walter, who owns Walter Angus near Hudson, Colo., said last year his family added 50 head to the herd of more than 600 that includes his cattle and calves, along with his sons' and daughter's. He said they'll likely add more than 50 this year, and they're keeping all of the heifer calves that meet their standards, with their eyes set on more breeding.
Still, he recognizes that many of his peers are more likely to sell heifers than to hold them back for breeding, since those animals are fetching such an incredible price.
"There's some real profit-taking going on right now," he said. "That's the incentive for not keeping the calf, or more of them."
Walter said the fact that he's still able to sell bulls and bred heifers tells him others are looking at expansion, as well, but a big change in numbers likely won't happen soon.
He said the industry may never get back to the big numbers, citing the idea that more beef is produced now from fewer cattle.
"We're making more beef with the same amount of grass and feed, and that's just because of better genetics," he said.
Koontz, who has a PhD in agricultural economics from the University of Illinois, said that's one main reason the decrease in the national herd is no cause for panic just yet. He said numbers are down, but weights are up, pointing to the idea that the amount of beef produced is not dropping as quickly as sheer headcounts indicate.
"The declining number isn't the whole story," he said. "It's really production."
Robb said it's important for the industry to address supply issues, but it's a process that takes time.
"It takes more years to raise a cow than it does to have a chicken lay an egg," he said.
Robb, though, also reiterated that overall, the outlook is good for producers, with a seemingly good amount of moisture in Colorado and prices that are likely going to stay where they are through 2015.
"The potential is here that the number [of cattle and calves] can pick up because profit potential here in 2014 looks very bright for cow-calf producers," Robb said. ❖