Late January brought USDA’s Cattle Inventory report, which provided an estimate of cattle numbers across the US. As expected, beef herd liquidation continued during 2011, despite the stronger fall markets. The severe drought that plagued much of the southern plains pushed many cows to slaughter and forced many ranchers to reduce their herd size. Estimated beef cow numbers fell by three percent, which is the largest single year decrease in many years.
One number that has gotten some attention in the press was a one percent increase in the number of heifers held for beef replacements. However, it is important to note that the increase in heifer development amounted to 73,000 heifers, while the three percent decrease in beef cow numbers was a drop of nearly one million cows. So, while the increase in heifer retention is significant, in my opinion it is premature to suggest that expansion is “underway” as some have said.
The implications are clear; the 2011 calf crop will likely be around three percent smaller. Holding everything else constant, this is likely worth $5-$8 per cwt in price. Also, it’s important to remember that we are still at least a couple years away from seeing larger feeder cattle supplies, as the only way to expand would be to hold back heifers in the short term. If expansion were to begin during 2012, larger calf crops wouldn’t be seen until 2014.So, while there are questions on the demand side, it is hard to imagine the supply side looking any more positive over the next couple of years.
Kentucky cattle inventory showed a continued decline in beef cow numbers as well, despite the higher prices and more favorable weather. Competition for pasture and hay ground for row crop production was likely a major factor behind the decline. Kentucky beef cow numbers were estimated to be down by 28,000 (-three percent). USDA’s estimates of Kentucky’s beef cow numbers have decreased by more than 200,000 cows since January of 2007. Also of note was another decrease in heifers held for beef cow replacement in the state, suggesting that Kentucky beef cow numbers are not likely to increase during 2012.