1 August 2011

6 minute read

North America

Ron Plain

This was expected given that slaughter of cull cows was 4.8 per cent higher during 2010 than in 2009 and 0.7 per cent higher in the first half of 2011 than in January-June 2010. This year's calf crop is expected to be the smallest in over 60 years. Although cattle prices have been strong in recent months, feed prices are high, there is a severe drought in the southern plains, and the weak US economy impacts negatively on cow-calf producers, many of whom rely on off-farm employment.

Revisions. There were two revisions to USDA's previous estimate of the July 2010 cattle inventory. The size of last summer's beef cow herd was revised down by 50,000 head and the dairy cow herd was increased by 50,000 head. The total number of cows was unchanged.

Total Inventory. The total number of cattle and calves in the US on July 1, 2011, was 100.0 million head, down 1.1 per cent from July 2010 and 4.6 per cent lower than at the last cyclical peak in 2006. This is the lowest July cattle inventory since long before USDA started the July inventory series in 1973.

Calf Crop. The 2011 calf crop is estimated to be 35.5 million head, down 0.5 per cent from a year earlier and the smallest calf crop since 1950. This is a smaller decline than implied by USDA's last herd survey which said the number of cows and bred heifers was down 1.3 per cent on January 1, 2011. The size of the calf crop has declined each year since 1995.

Cow Herd. This inventory report indicates the July 1 number of beef cows that have calved (31.4 million) was 1.1 per cent smaller than on the same date last year. The number of dairy cows that have calved (9.2 million head) was up 0.5 per cent from a year ago. The combined cow herd is 0.7 per cent smaller than in July 2010.

Replacement Heifers. There were 4.2 million beef heifers on July 1 being held to add to the cow herd, 4.5 per cent fewer than on July 2010. The number of dairy replacement heifers, also 4.2 million head, was up 3.7 per cent from 12 months earlier. The combined number of replacement heifers is down 0.6 per cent from a year ago.

Feeder Cattle Supply. At the start of July, the number of steers weighing 500 pounds and over was down 1.4 per cent; the number of 500 pound plus heifers not being held for cow replacements was down 1.9 per cent; and the number of calves weighing less than 500 pounds was down 1.1 per cent from a year ago. In total, the inventory of feeder cattle was 1.3 per cent smaller than 12 months earlier.

Cattle Slaughter Forecast. For all of 2011, I expect fed cattle slaughter to be 0.4 per cent lower than a year ago. During the first half of 2011, steer and heifer slaughter was up 0.7 per cent. The number of cattle on feed July 1 was up 2.5 per cent in total, with the number on feed in feedlots with one-time capacity of 1,000 head or more up 3.8 per cent. There is one fewer slaughter day in the fourth quarter this year. Slaughter of cull dairy cows is likely to be up 2.9 per cent compared to 2010. A 2.3 per cent decline in 2011 beef cow slaughter is forecast.

Summary. Inventory numbers imply the January 2012 cattle herd will be roughly 1 per cent smaller than the year-earlier number. The combined number of cows and replacement heifers is 0.7 per cent smaller than on July 1, 2010, implying a smaller calf crop in 2012 for the 17th consecutive year. Lower inventories should mean stronger prices. It appears that 2011 fed cattle prices will average over $110/cwt with 2012 prices higher still. High corn prices should hold 2012 feeder cattle prices close to this year's level. Through May, beef exports were 27 per cent above year-ago levels. As expected during a worldwide recession, meat demand was soft in 2009 and early 2010. If the economy grows, then beef demand should improve. Demand for slaughter steers and heifers was up over 10 per cent during the first half of 2011 compared to a year earlier. The strengthening income picture for cow-calf operations should slow beef cow slaughter and eventually lead to herd expansion.

The data from USDA's July 2011 cattle inventory report is in the table below.

Actual federally inspected cattle slaughter and prices for 2008, 2009 and 2010 along with our forecasts of slaughter levels and prices in 2011 and 2012 are given in the table below.

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