September 20, 2008
US cow slaughter up; could trim herd size
US cow slaughter continues at above-year-ago and five-year-average levels, helping to curb short-term beef prices but trimming available supplies in the long run.
Demand for lean beef is driving cow prices higher and prompting aggressive culling of the herds. If the trend continues, it could result in a smaller cattle herd going into 2009 and help support returns to cattle producers for the year.
Not only is cow slaughter at historically high levels, but the rate of slaughter continues to expand, according to statistics provided by Jim Robb, agricultural economist for the Livestock Marketing Information Centre.
Through the week ending August 23, cow slaughter rates were climbing and were 9.1 percent above the same period a year ago, said Glenn Grimes, agricultural economist at the University of Missouri. Dairy slaughter is up about 4 percent for the period, and beef slaughter is up about 13 percent, he said.
For the four weeks ending August 23, total slaughter is up 21.8 percent, dairy slaughter up 14.4 percent and beef slaughter up 27.9 percent, Grimes said.
Grain and forage costs are down from their peaks as drought conditions ease this year and prospects for a good corn harvest remain uncompromised. However, they still are high by historical standards, and they remain very volatile.
The higher feed costs make keeping questionable cows through the winter untenable, Grimes said.
Grain usually isn't a large component of cow rations, even for dairy cows, which typically receive more than beef cows, said Chris Richards, extension animal nutritionist at Oklahoma State University. But with pastures about to go dormant for the winter, feeding grass or alfalfa hay along with necessary protein supplements may be too expensive, he said.
John Nalivka, president of Sterling Marketing Inc., said beef cow slaughter for the year is the highest it has been since the height of the drought liquidation in 1996.
One of the major reasons for this is that cow prices are at historically high levels, Nalivka said. For example, the August average of utility boning cows at the Sioux Falls stockyards was US$65.83 per hundredweight. The previous August record was US$56.88, hit in 1990. It was US$55.25 last year.
Those gains equal about US$100 a head and makes per-head cash flows higher than the producer is getting for calves, Nalivka said. These are hard numbers to ignore.
Cows are in demand because lean beef imports are down about 20 percent from a year ago, Nalivka said. There are a variety of reasons for the drop, including a weak US dollar and competition for that product from other countries, he said.
Simultaneously, demand for ground beef is up as a weak economy sends more consumers to the ground product and away from the more expensive steak items, Nalivka said. This development has driven prices for grinding beef to record levels. The meat from cow carcasses is nearly all grinding beef.
Some might claim the increase in US cow slaughter this year is the result of increased imports of cull cows from Canada. But while US imports from Canada are up, comparisons to a year ago aren't valid because they were blocked at that time by concerns over bovine spongiform encephalopathy, or mad cow disease.
Canadian imports this year also don't account for all of the increase in cow slaughter, Nalivka said. Through August 30, the US imported 97,063 cows from Canada, and when compared with the year-to-date cow slaughter of 3.9 million head, the Canadian portion only accounts for 2.5 percent of the total, he said.
"Cow slaughter likely will remain relatively strong with a seasonal increase into the fourth quarter of this year as producers face strong cull cow prices and high feed costs going into the winter," Nalivka said.
Consequently, the US will see a substantially reduced herd going into 2009, and, depending on demand for feeders and beef demand, should lead to another year of good cattle prices, Nalivka said. Returns likely will be pressured, however, by continued high input costs.
