| The U.S. cattle cycle tends to move in a decade-long pattern of
price variation that has its basis in producer’s response
to price signals. The simplest explanation is that cow-calf producers
tend to act as if the current calf prices will continue into the
future. When cattle prices are high, beef producers respond by retaining
heifer calves to use as replacements, in the hope that a larger
herd will result in a larger income. This is the case even though
the financial reward for retaining heifers can be two to three years
away and current market revenues from the sale of heifers will be
sacrificed. The net effect is as the number of beef cows increases
nationally, the number of slaughter cattle produced consequently
increases. As a result, prices are depressed as demand for beef
cattle and beef products exceeds supply. As beef cattle prices decline
below break-even levels, beef producers respond by reducing herd
size or liquidating to minimize losses. The following links give
more information about understanding the cattle cycle. |
