Cattle Industry Relationships: Tinder Not Required
DR. ANDREW P. GRIFFITH
KNOXVILLE, TENNESSEE
With a title like the one this article has the story could go a number of directions. It could start with, “it was seven hundred fence posts from your place to ours,” or it may mean farmers logging on to FarmersOnly.com to find their future spouse. An alternative direction may be about industry participants developing relationships within the industry to strengthen their position in the industry.
However, the relationships that are about to be discussed have nothing to do with Tinder, FarmersOnly.com, Eharmony, or Silver Singles.
Additionally, the relationships about to be discussed have very little to do with human interaction.
The relationships that will be focused on have to do with a couple of factors that will influence cattle markets the next several years. The relationship being talked about is cattle inventories influence on cattle prices, but also how drought may continue to influence cattle inventory. Some readers may decide to stop reading at this point since it no longer reads like a soap opera, but stay tuned and the story may become more intriguing.
The January 1, 2022 cattle inventory report was released at the end of January. The report stated all cattle and calves inventory declined 2.0 percent from the previous year and totaled 91.9 million head, which is the lowest inventory number since 2016. The total number of beef cows to start 2022 was 30.1 million head, which represents a 2.3 percent decline from 2021 and is the lowest beef cow inventory since 2015. The story could continue as the number of heifers retained for beef cow replacement totaled 5.6 million head, which is a 3.3 percent decline from 2021 and the lowest number of heifers retained since 2014. All of these factors plus a few more resulted in a 2021 calf crop of nearly 35.1 million head, which is the lowest calf crop inventory since 2016.
As the price of beef, fed cattle, and feeder cattle increase, one might think that producers would be moving toward expanding the cattle herd. However, the cattle cycle appears to be working fairly smoothly as relatively low calf prices meant pushing more heifers into the slaughter mix along with more mature cows in 2021. The cattle cycle is not the only thing at work though. Some of the increase in cow and heifer slaughter in 2021 was due to drought across the West and the Northern Plains. Producers in these regions were forced to move cattle as forage supplies decreased.
As the cattle market moved into the fall months of 2021, calf and feeder cattle prices remained strong despite the seasonal tendency and have started 2022 with some strength. Despite this strength, drought issues have expanded across a broader region of the United States to include the West, the Great Plains and everything in between the two.
Additionally, some drought struggles are beginning to slip into Arkansas, Mississippi, and Louisiana.
The failure to receive adequate moisture has resulted in cattle producers making contingency plans. Some of these contingency plans are already in motion as some producers in wheat grazing country have moved cattle off wheat earlier than originally planned. This may be the reason cattle on feed numbers were so high to start the year. This one factor points towards fewer cattle to be placed in feedlots in the coming months, which should support cattle prices. However, more heifers may be placed on feed in the coming months relative to the expectation if drought conditions continue to persist in cow-calf producing regions.
What does this have to do with relationships? Maybe nothing at all, but drought and cattle inventory both seem to influence cattle prices, which in turn also seems to influence cattle inventory. There is a relationship between these three. Sometimes the relationship appears advantageous while other times it appears less than advantageous. The one thing that is certain is that they did not have to create a profile on HubbaHubba, or Mingle with Singles, or GrabYouAHoney.com to meet each other. The other thing that is for certain is that it will take more than lawyers and a justice of the peace for these three to dissolve their relationship. The last thought is all of this adds up to stronger cattle prices in the near term. ∆
DR. ANDREW P. GRIFFITH: Assistant Professor, Department of Agricultural and Resource Economics, University of Tennessee