Rising cattle numbers may pressure beef market

by Ron Sterk
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Ron Sterk

The total U.S. cattle herd as of Jan. 1 was at a seven-year high and increased more from a year earlier than forecast by many analysts, suggesting seven-year-low cattle prices last fall had less of a negative impact on the rebuilding of beef cattle herds than expected. The U.S. beef cattle herd also was growing faster than the dairy cattle herd, despite market signals that suggested those numbers would move in opposite directions.

In its Jan. 31 Cattle report, the U.S. Department of Agriculture estimated the U.S. cattle herd on Jan. 1 at 93.6 million head, up 2% from 91.9 million head a year earlier and the highest since 94.1 million head on Jan. 1, 2010. It was the third consecutive year of increases since cattle numbers bottomed at a 62-year low of 88.5 million head in 2014. The average trade expectation was near 92.8 million head, up less than 1% from 2016. The Jan. 1, 2016, estimate was revised down 70,000 head from last year’s initial estimate.

The 2016 calf crop was estimated at 35.1 million head, up 3% from 2015 (compared with trade expectations of a 2% increase), with calves born in the first half of the year up 4%.

Meats
U.S. cattle herd increases more than expected in 2016.

The report estimated 31.2 million beef cows had calved in 2016, up 3% from 2015 (a 1% increase was expected), and that 9.35 million milk cows had calved, up less than half a per cent (about as expected). Beef replacement heifers (heifers held back from slaughter for breeding) on Jan. 1 totaled 6.42 million head, up 1% from a year earlier (a 1% decrease had been expected), while milk replacement heifers (heifers held back to build the dairy herd) were 4.75 million head, down 1% (no change was expected).

Lower milk cow replacement heifers came despite improving milk prices in 2016 and further improvements forecast for 2017. In its Jan. 19 Livestock, Dairy and Poultry Outlook the U.S.D.A. said, “The forecast for milk cows is raised by 5,000 head (from the December forecast) to 9.365 million for 2017, as higher expected milk prices and relatively low feed costs are expected to encourage greater expansion of the herd.”

In contrast, higher beef replacement numbers in the Cattle report came despite lower beef prices, live cattle futures that hit seven-year lows last fall and indications of liquidation of the beef cattle herd. Indications that producers were not holding back heifers to build the beef cattle herd came in the prior week’s U.S.D.A. Cattle-on-Feed report that showed cattle in feedlots of 1,000 head or more head at 10.6 million head, up slightly from a year earlier, December placements of cattle in feedlots at 1.8 million head, up 18% and the highest in six years, and December marketings (cattle sold by feedlots for slaughter) at 1.8 million head, up 7%. Analysts suggested the higher placement and marketing numbers were an indication that heifers were not being held back for breeding but were being sent to slaughter.

What this indicates for consumers is more beef at the retail counter this summer, and continued larger supplies for a longer period of time than expected. Cattle placed in feedlots during December will be marketed from June through October, depending mainly on what they weighed going in. That means more beef during that period, aided by low feed costs that may encourage feeding cattle to heavier weights. And the higher-than-expected beef heifer retention number, (which typically temporarily reduces slaughter cattle numbers because those heifers are not entering feedlots, but didn’t appear to do so this time) suggests more beef cattle available next year as well. Some analysts projected the Jan. 1, 2018, cattle inventory to decline from this year, but that was before this year’s larger-than-expected tally.

 

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