July 25, 2007

Drought shrinks US cattle herd

The US cattle herd is on the decline due to drought which ravaged the Southern plains last year and the western regions this year.

As of July 1, cattle numbers were 104.8 million, 0.4 percent or 400,000 heads lower than a year earlier with liquidate rate in line with pre-report estimates. The high rate of cow slaughter that has been witnessed over the past year was reflected in the beef cow inventory of 33.35 million head, down 100,000 heads and the smallest 1 July cow herd since 1990.

The downturn in beef cow replacement herd surprised analysts with numbers down 6 percent on a year ago (pre-report estimates were looking for a 2.3 percent reduction). The decline in heifers for beef cow replacement indicates that US beef producers have not only trimmed their herd rebuilding but they are certainly in the liquidation phase. The decline was also attributed to high feed costs and profit uncertainty.

The smaller cow herd and this year's severe winter weather contributed to the 2007 calf crop falling by 170,000 head, to 37.4 million head - the lowest level in more than 50 years.

However, the smaller cow herd and calf crop is expected to constrain growth in US beef production over the next two years. This projection should be bullish for US domestic beef prices, particularly for lean beef, and should have a flow-on effect to imported beef prices.