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Sunday November 19, 2017

Oh where, oh where has the cattle herd gone?

Two recent USDA reports illustrate the good news/bad news aspect of current U.S. beef cattle markets. The survey data confirm the good news that American cattle farmers are actively expanding the beef-cattle herd, which will eventually lead to greater beef supplies and more moderate prices as a result. The bad news: That rebuilding process is going to be long and slow, at least to start.

Supplies are still tight. USDA's July Cattle report contained USDA’s first estimate of the 2015 calf crop and it came in 1.2 percent higher than that of 2014, at 34.3 million head. If the estimate is true, 2015 will be the first year the calf crop has grown by 1 percent or more in more than two decades, according to Iowa State ag economists Chad Hart and Lee Schulz. Young female cattle now make up 16.1 percent of the total U.S. cow herd--another 20-year high mark--which means cattle ranchers are now holding females off the market at a rate consistent with levels during the large expansionary phase of the early 1990s, diverting them into producing more calves down the road, but temporarily cutting into the beef supply as they do so.

Heifers are being held to spur expansion

We have a long way to go to recover from the lost numbers brought on by continued drought during the last decade. The number of "feeder calves," those ready to go onto the final phase of feeding before being marketed as beef, are still tight. Feeder cattle supplies have been within the range of 34.87 and 35.50 million for the past four years, and that 35.25 million average of those four years still falls 8.4 percent lower than the average for 2004 through 2010—the last years in which we saw what they consider an overall increase in feeder cattle supplies.

Feeder cattle supplies are still tight

Much of that year-over-year increase in feeder cattle supplies is being fed by a relatively larger increase in the number of light calves, those under 500 pounds. What that statistic means is that even though the overall supply of calves available to put on feed is increasing, the majority of those are those light calves, which won't be big enough to go into feedlots until late in the year and into next year. So don't expect any significant impact on beef supplies to appear until 2016. Beef cattle inventories are increasing right now, but the supply of beef will actually fall another 1 percent or 2 percent in 2015 following the 5.7 percent year over year decrease in 2014. That adds up to sustained high wholesale prices for the near future.

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