ANALYSIS - The decision to keep a heifer for breeding is not just affected by cattle markets but the relative performance of the crop industry too.
This is according to Dr Kenny Burdine and Dr Greg Halich, University of Kentucky, who write that several years of increased arable profitability may have priced cattle off the land in parts of the US.
Firstly, there is less land on which to rear cattle and secondly, ranchers looking to buy land now have to pay higher prices due to the effect of crop growing profits and its effect on land values.
This is their message to Kentucky producers this summer in a state which has frequently favoured cattle and hay over growing soybeans and corn.
“The last few years have done an excellent job illustrating a basic economic principle - units of production are allocated to their most profitable use,” they wrote in a recent Extension newsletter.
“In many states like Kentucky, we have historically run cattle and produced hay on ground that was suitable for row crop production.
“As the expected profitability of corn and soybean production increased over the last several years, much of this land has become increasingly attractive to grain crop producers.”
The pair added that converting pasture to row crops is easier than reverting back to pasture.
Establishment time and installing fences are two obstacles, without taking into account competition with growers over land.
Describing land rent as ‘sticky’ they do not envisage a major drop in prices soon.
“Grain producers are still likely to be able to pay more than cattle producers for that ground,” they added. “Even at $4-$5 per bushel of corn.”
Then there is the issue of historically high cattle prices, which mean income is sacrificed the very second a heifer stays on farm to breed.
Coupled with the fact that most producers see more risk in the livestock industry that 10 to 20 years ago, Dr Burdine and Dr Halich stressed that producers require seeing future long-term profitability in keeping cows.
But profit won’t ensure rain and the pair states that drought conditions are the biggest cause of herd contraction.
“Over the last ten years, most major cattle producing areas have dealt with drought at some point,” they add.
“Given that so many areas were forced to reduce numbers recently, it is very likely that there will be interest in rebuilding in those areas once weather conditions improve.
“The best example is the Southern Plains where beef cow numbers in Texas are down 22 per cent from 2011 to 2014.”
Top image via Shutterstock