Beef producers: Sell everything

KIRKSVILLE, Mo. – Harlan Hughes doesn’t want cattle producers to miss out on current historic-high prices for beef cattle.

At a recent livestock symposium in Missouri, Hughes, an economist from Laramie, Wyo., urged those with beef cattle to cash in on their calves.

“Sell everything, steers and heifers, and put the money in the bank,” Hughes said.

“I don’t want to come back in two years and have you tell me that you missed profiting from the cattle cycle.”

Ride the wave. There have always been cycles of boom and bust in the cattle business, Hughes said, with periods of high prices followed by low prices.

When the number of cows in the breeding herd goes up, more calves are produced, creating more beef. With more beef for sale, prices go down.

The cycle persists because herd size responds to the previous year’s prices.

“Cattle producers are always looking in the rear-view mirror,” Hughes said.

Don’t save heifers. When cattle prices are highest, producers should not save more heifers to produce more calves – they should sell heifers.

“The time to save heifers, and buy more, is when prices are low,” Hughes said.

The problem is the biology of cows, Hughes said. It takes a long time between when a rancher decides to breed a cow to have a calf and the time the calf is ready to market. It takes even longer, three years, before that offspring is ready to have another calf.

Cattle cycles usually run 10 years from peak to peak. Past cycles have fit into decades.

Beware the 5’s. Early in his career, Hughes said, an old rancher told him, “Beware of years of the ‘5s.”

Later, looking at the ups and downs of the cattle cycle, he noted that the bottoms of the price cycle usually came in the middle of the decade.

To support his outlook, Hughes used baseline projections on cow numbers and prices from the University of Missouri Food and Agricultural Policy Research Institute.

The current cycle has been extended an extra three years and continues, Hughes said. Severe drought in the western states has led to ranches selling cows and reducing the herd.

The good news is that means cattle prices will remain high.

Prediction. Hughes predicted three more years of good beef prices based, again, on to the cow’s biology. It will be that long before calves will rebuild the herd.

“We’re continuing to kill cows and not save heifers,” Hughes said.

Watch the Texans. In response to a question, Hughes said that the closing of the border to importation of Canadian cattle had little effect on the current high prices.

Increased consumer demand in the face of short U.S. supply was a bigger factor.

“We have this impression that there are a lot of cattle up there in that great big country,” Hughes said. “Texas has more cattle than Canada.

“If you want to see the future trend, watch what Texans are doing.”

This year, Texas began to increase cow numbers.