July 26, 2010

US cattle herd shrinks to record low on market uncertainty

The US beef and dairy herd on July 1 totalled 100.8 million head, down 1.2% on-year, the smallest in at least 37 years as farmers remained wary of beef demand during the economic recovery after losing money in the past two years, according to the USDA.

Cattle producers may make about US$51.53 per cow this year, after losses in 2009 and 2008 because of high feed costs and declining beef demand, said Erica Rosa, an economist at the Livestock Marketing Information Centre in Denver. Uncertainty about economic recovery may be keeping ranchers from expanding herds, she said.

"Overall, cow-calf producers continue to reduce herd numbers, rather than expand by retaining heifers," said Rosa. "Although calf and feeder-cattle prices are higher than 2009, input/production costs still remain high and there is still quite a bit of uncertainty currently and about the future."

An additional 4.4 million beef heifers were being kept back for breeding in the next year, down 2.2% from July 2009. Dairy farmers were holding 4.05 million replacement heifers back for breeding, 2.5% more than a year earlier.

The 2010 calf crop fell 1.2% to 35.4 million head, compared with a 1.1% decline estimated by analysts.

The price of wholesale choice beef, an indicator of demand for the meat, rallied 12% this year through midday, according to USDA data. The price was down 5.2% last month, the second straight decline.