August 1, 2011

US beef cattle herd dives to record low

With the USDA reporting a 1.1-million head fall for the year to July 1, 2011, at 100 million heads, the US cattle herd has dove to its smallest inventory since records commenced in 1973.

While industry participants were tipping US producers to begin rebuilding efforts, severe drought conditions across the southern plains of the US saw increased beef cow slaughter during the second half of last year and over recent weeks. As a result, the US beef cow herd has declined for the fourth consecutive year, with numbers now standing at 31.4 million heads.

Any potential for the US herd decline to be reversed continues to be put on hold, as the number of heifers for beef cow replacement declined 5% on-year, to 4.2 million heads - the fifth consecutive annual decline. Fewer replacement numbers will continue to pressure calf crops, which will lead to lower beef production over the next couple of years - a very bullish factor for US beef prices in 2012.

Contrary to the beef herd, the US dairy herd is in an expansion phase, although the increase in numbers is not enough to offset the decline in the beef cattle herd. Prospects for further expansion in the dairy herd has been boosted with heifers for dairy cow replacement and dairy cow herd numbers jumping 4% and 1% respectively, to 4.2 million heads and 9.2 million heads. Drought conditions have seen dairy cow slaughter lift 6% so far this year (January to June), to 1.5 million heads.

Given the anticipated tighter cattle and beef supplies for the US in the coming years, demand for imported product is expected to increase, with beef prices also forecast to rise. However, price movements for the remainder of 2011 will continue to be heavily dependent on the state of the US economy and competitor meats.