February 27, 2014

US reports slow start to cattle herd rebuilding

The US cattle industry anticipates another year of contraction in 2014, with heifers for beef cow replacement being up only 1.7%, calves under 500 pounds being down considerably at 3.7%, and the annual calf crop being down 1.0%, according to USDA's annual cattle inventory report.

Most final estimates were ultimately reminding them that while herd rebuilding is pending in the beef cattle sector, it will likely be a slow process (at least initially) given the historically small inventory that the herd will be rebuilding from.

Market signals for expansion are stronger than they have been in years and continue to grow and the industry is poised to respond. The year 2014 could be a year of herd stabilisation (with little or no growth) that often occurs in first year of herd expansion. Most herd expansions in the past have included one to two years of minimal or modest herd growth before accelerating for two to three years.

At 87.73 million, the report showed the lowest January 1 inventory of all cattle and calves in the US since the 1951 total of 85.57 million. By this year, one of the longest and most severe liquidation phases in the history of cattle cycle has reduced the US beef cow herd to 29.04 million, its lowest level since 1962. Last year marked the eighth consecutive year of declining beef cow numbers. And, although the 2013 beef cow culling rate of 11.0% (2013 beef cow slaughter as a percent of the January 1, 2013 beef cow inventory) was recorded as the sixth consecutive year of double digit beef culling, low rates of beef cow slaughter in the last quarter of 2013 suggest producers are indeed beginning the process of herd rebuilding.

The report suggests that collectively cattlemen have continued to add youth to their breeding herds as replacement heifers are up from last year, even while the national beef cow herd has declined. And though heifer replacements are higher than estimates for the past three years, they collectively remain lower than any consecutive years since the early 1990's suggesting "real industry-wide expansion" has yet to be initiated. But perhaps one of the most notable things about the report was that the inventory of beef replacement heifers as a percent of the beef cow herd -- at 18.8% -- was the largest in almost 40 years, including the large expansionary phase experienced in the early 1990's.