December 26, 2012

US beef cattle slaughter increases beyond expectations

US drought conditions have caused beef cattle slaughter to rise above expectations with normal weather patterns, USDA reported.

According to USDA's latest Livestock, Dairy and Poultry Outlook report, unfavourable milk prices in the face of high feed costs have led to much higher dairy cow slaughter than in 2011. Although total cow slaughter has been down overall from corresponding periods in 2011, weekly dairy cow slaughter has been significantly higher. Federally inspected beef cow slaughter has also increased seasonally, but remains below year-earlier levels for the corresponding weeks, at a rate that more than offsets the over-year increased dairy cow slaughter rate.

Fourth-quarter 2012 cow slaughter to date is about even with fourth-quarter slaughter in 2011. Cow prices have declined about US$10 per hundredweight from their May 2012 record levels, but remain US$10-US$12 higher than for the same periods in 2011.

Demand for ground beef products and the fact that cow inventories are the lowest in decades will likely continue to support cow and bull prices through the remainder of 2012, 2013, and into 2014 or 2015.

As with cow slaughter, where the first three quarters were over-year lower, commercial heifer slaughter was down about half a million head through the first three quarters of 2012. This fact, combined with preliminary estimate of a 2012 calf crop well below the 2011 crop, implies a significant reduction in heifers available for retention as replacements during 2013.

While a lower over-year cow inventory on January 1, 2013 is likely, the significantly reduced pool of heifers available for replacements has implications for January 1 cow inventories for the next several years.

In addition, increased heifer retention for breeding will reduce the supply of feeder heifers available for placement on feed, resulting in fewer cattle on feed and marketed from feedlots.

Reduced fed-cattle inventories should be supportive of fed cattle prices over the next few years.