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US beef cow repopulation – the rebuild begins

US beef cow repopulation – the rebuild begins

After the drought-induced decline in the US beef cow herd in recent years, the industry is making a mends and rebuilding its depleted numbers, with expectations to grow by more than three million head in the next three-to-five years.

With around 50 per cent of New Zealand’s beef exports destined for the US, the rebuilding of the US cow herd may impact the strong demand for Kiwi beef seen in recent years, according to Rabobank.

In its recently-released report titled ‘Beef cow repopulation – the case for diversification’, Rabobank says that the economic signals for rebuilding the US herd are clear, and in the next four to six years, the location of the US cow herd is going to look “considerably different” than it did before the 2011 drought.

Report co-author, US-based Rabobank Food & Agribusiness Research and Advisory (FAR) senior analyst Don Close says the initial growth phase will be relatively quick and will flatten out.

“We are going to see the process happen in two phases and in different geographies than we would have seen a few years ago,” Mr Close says.

“The excess capacity in the southwest and high plains will fill out first. Once that area has repopulated, rebuilding will occur in the central US – mainly in the Dakotas and into the Corn Belt.

“What is worth noting is that the rebuilding of the US herd will hopefully return the industry to a place of less market volatility for all market segments. Once cow numbers are rebuilt, there should be a levelling off of replacement cow prices which have remained at historically high levels since the 2011 drought.”

Mr Close says this shift will create opportunities for new winners to emerge, and will challenge historical models of calf production, feeder acquisition, and crop-producing businesses.

“Although it will depend on factors such as exports and weather, I expect a total of 3.5 to four million head more than the 2014 low of 29 million beef cows,” he says.

“Of that total, 1.7 million head will come from newly-developed capacity in the central US – areas typically focused on row crop production.”

Given the importance of the trends in the US beef market that can closely impact the New Zealand beef market direction, local [NZ] beef producers will be watching closely to see how this re-establishment of the domestic US herd unfolds.

ENDS

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