F4—Lancaster Farming, Saturday, April 7,1984
Something new enters the cattle cycle
WASHINGTON, D.C. - After a
fairly typical beginning, the latest
cattle cycle has stalled. Any
significant herd expansion may not
resume until 1986 or 1987, ac
cording to USDA livestock analyst
Ronald Gustafson.
The current cycle began in 1979
with 110.9 million head. By 1982,
the cattle inventory had reached
115.6 million. Then the traditional
upswing was interrupted.
In response to a financial
squeeze caused by lower livestock
prices, as well as a general decline
in farm income, producers were
forced to slaughter more beef
cows. This was especially the case
with crop-livestock producers
whose cattle are a supplement to
their primary crop business, says
Gustafson.
On January 1, 1983, the cattle
count came to 115.2 million head,
virtually unchanged from the year
before. More importantly, the
foundation for greater growth was
disrupted with a reduction in the
breeding herd. Producers had
trimmed the cow inventory by 3
percent and had cut back the
number of possible replacement
heifers by 4 percent.
Doesn’t fit mold
None of this seems to fit the mold
of the eight cattle cycles recorded
since 1896: expansion of cattle
numbers, building to peak levels,
followed by a leveling-off or
moderate decline. Each inventory
has peaked at a higher level than
the previous cycle.
This time around, the cyclical
pattern is not expected to produce
larger cattle numbers than the
cycle which ended in 1979. The
reasons, however, may have more
to do with the last cycle than the
current one.
“The facts suggest that the real
abnormality may have occurred in
the 1967-79 cycle,” Gustafson says.
That 12-year cycle, which began
with 108.8 million head, saw the
sharpest surge in cattle numbers
ever and the largest inventory
liquidation. The cycle peaked at
132 million head in 1975, and about
21 million head—l 6 percent of the
total—were liquidated during the
next 4 years.
Large buildup
Such a large buildup—and ar
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equally great decline—was based
on what is now considered a
reallocation of resources,
Gustafson says. During the
beginning buildup phase of the past
cycle, the amount of forage
available increased substantially
as fertile land was shifted out of
cash crops and into cropland
pasture.
“Also, the increased use of cheap
nitrogen fertilizers enabled
pastures in the more humid areas
to support more cattle per acre,"
he says.
The buildup during the previous
cycle was further booked by
economic conditions that favored
the production of beef over crops.
An expanding economy, rising
incomes, low inflation rates, and
plentiful supplies of grain all
spurred rapid growth of cattle
herds.
Cattle cycles typically begin
with a herd buildup when
producers find promising con
ditions, such as low feed costs,
growing demand, and better prices
for their beef. Such expansion
takes several years, since it is
limited by the biological timetable.
For example, it takes from 27 to 48
months from the time a heifer is
bom into a herd until her first calf
reaches market weight or is ready
for breeding to expand the herd.
Time lag
Also, because of the tune lag,
beef production may continue to
increase well beyond the tune that
prices signal change. This hap
pened in the last cycle. In the midst
of expansion, new pressures
emerged that wpuld eventually
limit beef production and lead to
the largest cattle liquidation in
history, according to Gustafson.
Blight was the first hint of
trouble, sharply reducing com
production in 1970. Despite a
record harvest in 1971 and a good
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crop in 1972, grain prices rose
because of growing exports, in
cluding a sharp rise in grain
purchases by the USSR. Livestock
producers not only faced higher
feed costs; but also dramatically
higher prices for other inputs
because of a sharp spurt in energy
prices and inflation rates.
In response to a decidedly dif
ferent economic environment, beef
herd expansion was finally reined
back beginning in 1975. Pasture
had already begun to be tran
sferred back to crop production in
1974. From 1974 through 1978,
cropland used solely for pasture
(some of the most fertile
pastureland) fell 6.5 million acres.
Competition effects
Another factor that played
and continues to play a large
part is the competitive pressure of
large pork and broiler production.
During the 1970’5, Gustafson says,
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the broiler industry was able to
seize opportunities to expand
production. In the early to middle
years of the decade, production
grew to meet a decline in pork
output. Later in the decade, broiler
production increased, as did pork,
in response to cutbacks in the beef
herd.
Because they aren’t land
intensive, pork and broiler
operations have been largely
unaffected by the reduction in
pastureland. Shorter biological
cycles for hogs and broilers mean
a quicker response to economic
conditions and market demands.
For hogs, the cycle takes from 10 to
27 months; For broilers, from 3 to
15 months.
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“Only by 1986 or 1987 is beef herd
expansion expected to resume,
despite more than sufficient
amounts of pasture land,”
Gustafson says. “The reduced
grazing acreage for beef still
translates into excess grazing
capacity in view of the steep
cutbacks in herds since 1975.”
At optimal levels, he adds, U.S.
forage capacity could sustain 120
to 124 million head. But he expects
that the current cycle will
probably peak near the lower end
of this range, given higher energy
costs and only moderate price
incentives. “And it will be the first
tune since 1896 that the cycle didn’t
peak at a higher cattle inventory
than the one before it.”
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