Much of the cattle numbers cycle results from the marginal shifting back and forth between backgrounding and cow herds. Sale barns in our region have seen a high volume of herd dispersion this past fall and continuing into this winter.
When the cost of gains in the feedlot become high relative to slaughter cattle prices, calf prices are lowered relative to both yearling and fed cattle prices. Cheap calf prices (relative to yearlings) favor backgrounding, and some producers gradually shift from cows to backgrounding.
Over time this decreases the calf crop and ultimately increases cattle prices after first suppressing prices during the cow herd reduction. We have seen this pattern over the past few years in our region. When beef slaughter prices become high relative to cost of gains in feedlots, calf prices rise faster and farther than yearling prices, which is unfavorable to backgrounding. Cow herds expand and feedlots place younger, lighter animals on feed and more feed grain is used. Ultimately, larger calf crops, larger beef supplies and larger feed grain usage results in lower beef prices, higher grain prices and lower calf prices. Again, the pendulum swings back to favor backgrounding.
The future isn’t certain and resiliency is necessary in this industry. Market research and adapting to the changing environment will continue to aid in our ability to thrive no matter the volatility of the scenario we face.
Backgrounding Calves. (2021, June 25). American Cattlemen.
https://americancattlemen.com/articles/backgrounding-calves
Research3, B., & Research3, B. (2021, April 26). To Sell or Background Calves?–
Introducing the BCRC Backgrounding Calculator. BeefResearch.Ca.
https://www.beefresearch.ca/blog/to-sell-or-background-calves-introducing-the-bcrcbackgrounding-calculator