February 2024

Cattle, sheep inventory cycles are changing

Cattle cycles stretch as far back as the seven fat, healthy cows and the seven scrawny, thin cows of Biblical times. The seven fat cows foretold seven years of good harvest. Everyone would have plenty to eat. However, the seven thin cows meant seven years of famine would follow. Sheep inventories are cyclical, too.

The Jan. 1, 2024 U.S. inventory of all sheep and lambs totaled 5.030 million head (Figure 1). This is the smallest sheep and lamb inventory ever. USDA provides the series back to 1867.

Figure 1. Tal US sheep and cattle inventories.

All US cattle and calves on Jan. 1, 2024 totaled 87.157 million head (Table 1). This is the smallest inventory of cattle and calves since 1951. The 28.223 million beef cows are the smallest since 1961. Despite fewer cows, beef production per cow continues to rise.

USDA’s National Agricultural Statistics Service compiles inventory estimates based on producer responses to surveys. NASS survey procedures ensure that all producers, regardless of size, have a chance to be included in each survey.

Both cattle and sheep industries have distinct growth and liquidation cycles. Inventory cycles are measured from one trough to the next trough. The current cattle cycle and current sheep cycle began in 2014. Both entered their tenth year in 2024.

Table 1. Cattle inventory by class and calf crop.

Several factors drive cycles

Sheep and cattle have similar 9 to 14-year inventory cycles. Cycles result from lagged responses created by both biological and economic phenomena.

One might logically expect sheep to exhibit shorter inventory cycles than cattle because of shorter gestation (about 147 days for sheep versus about 283 days for cattle), multiple births or twinning and shorter time from birth to market. These production characteristics apparently do not create a shorter sheep inventory cycle. Weather abnormalities often initiate or modify livestock inventory cycles.

Inventory swings diminish, price swings do not

Cycle length in both species has generally shortened over time. Amplitude of cyclical inventory changes has also decreased. Several factors may contribute. Technological advances, especially in reproductive and feeding efficiency, speed production response to changes in prices. Enhanced market reporting and information gathering and dissemination may be improving producers’ decision-making ability. Increased responsiveness of producers and markets to economic pressures brought about by increasing costs and volatile output prices may also contribute to shortened cyclical length and reduced amplitude.

While the amplitude of cyclical inventory changes has decreased, the opposite has occurred with price movement. Cyclical behavior for prices is typically more erratic than for quantities. Historically, demand for cattle and sheep has been fairly inelastic, leading to cycles characterized by a greater percentage change in prices relative to quantities. Large changes in prices across the inventory cycle intensify financial uncertainty and boost risk for producers.

These price gyrations affect all segments of the industry. But the price swings may have different effects, and timing, on cow-calf producers than on stocker and backgrounding operators and still different effects on cattle feeders. The same goes for stock sheep producers and lamb feeders.

Improving efficiency in good times pays off in bad times

One key to thriving through price swings of inventory cycles is to increase efficiency during good times. Then, use this gained economic efficiency to build a financial reserve to survive the next downturn in prices.
No one can perfectly predict how high, or how low, prices will go and when the cycle will turn. The challenge for producers is to anticipate the price cycles and adjust their production accordingly.

Tough times call for focusing on management. However, in reality, producers often make their most important decisions–sometimes good decisions, sometime bad decisions–during good times.

Diversifying may help

Cattle and sheep have historically competed for many of the same resources. These include grazing land, labor, facilities and transportation. Some multi-species grazing synergies exist with cattle and sheep. Cattle and sheep working the same ground can utilize the pasture, labor and other resources more fully. Both animals eat grass. But sheep eat more brush and forbs. They graze more selectively, and lower in the pasture stand.

Diversifying can make a farm less vulnerable. If the market price for one product, say cattle, falls or doesn’t promptly respond to higher costs, then another product, say sheep, may compensate for the lower income. How much diversification may reduce income variability depends on the price and production correlations of the enterprises. If prices or production for both of the enterprises tend to move up and down together, diversifying gains little. The more production and/or prices of different products move in opposite directions, the more diversifying may reduce income variability.

Since 1996, South Dakota 60–90-pound feeder lamb prices have averaged $148/cwt (Figure 2). South Dakota 500–600-pound calf prices have also averaged $148/cwt. Calf and lamb price patterns since 1996 suggest feeder lamb prices often make highs when calf prices are weak and vice versa. This means adding sheep as an enterprise could potentially smooth out the highs and lows in income compared to only producing calves.

Figure 2. South Dakota annual average calf and feeder lamb prices.

How much diversifying can smooth income depends on the proportion of income derived from each enterprise. If only a small proportion of income comes from one product, it can do little to support income if the primary product market collapses.

Diversification involves tradeoffs

Farms have reasons to specialize. The strongest is to trim costs. While synergies exist, cattle enterprises and sheep enterprises have distinct fixed costs. These costs need to be paid no matter how much or how little is produced. By focusing on just cattle, or just sheep, producers can up output and maximize return on the fixed cost investment.

Narrowing enterprise focus on a farm allows for more in-depth knowledge development and execution. How’s the saying go, "Jack of all trades, master of none." Specializing can help hone production and marketing. Running a specialized farm doesn’t mean product offerings cannot be diversified. A cow-calf operation may choose to retain calves and market feeder cattle or retain calves all the way through finishing. No matter the reason for culling cows, cull cow marketing should be opportunistic. Cull cows should not necessarily be marketed the same way or at the same time every year.


Lee Schulz, extension livestock specialist, 515-294-3356, lschulz@iastate.edu


Lee Schulz

extension economist
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