Beef herd expansion near end?
Chris Hurt, Purdue University
via Wisconsin State Farmer - Aug. 5, 2019
Looking back a decade or so, the high feed price era from 2007 to 2013 caused downsizing of the beef industry. Beef cow numbers reached a low in 2014 which resulted in record high finished cattle prices near $148 per live hundredweight in 2015. Record high calf prices then stimulated expansion of the breeding herd. As an example, Kentucky 500 to 550 pound calves were $236 per hundredweight in 2015.
From the low point in 2014, beef cow numbers have expanded by nine percent. Total cow numbers including dairy cows are up seven percent. Commercial beef production has increased by 11 percent a combination of seven percent more cows and a four percent increase in beef output per cow.
The mid-year Cattle inventory from USDA tends to support the idea that the five-year herd expansion rate has leveled off, perhaps signaling an end to the expansion. The total number of cattle and calves was unchanged in the July survey of producers. Beef cow numbers were unchanged from a year-ago, and milk cow numbers dropped one percent. USDA also reported that the 2019 calf crop may actually be down modestly which will slow beef production increases for 2020 and 2021.
Another sign of producersí unwillingness to continue expansion are fewer replacement heifers going back into the breeding herd. Beef replacement heifers were down four percent and dairy replacement heifers were down two percent. In addition, weaker calf prices are not providing financial incentives to expand. Kentucky steer calf prices so far this year are $7 lower than for the same period last year.
Trade has been a negative factor for cattle prices so far this year, but that may improve. Beef exports in the first five months were down three percent. However, current sales indicate a more rapid export pace for the rest of the year, and USDA analysts suggest annual exports may be unchanged for the year.
China remains the biggest concern as their volumes were down 39 percent in the five months for which we have official census data. China purchased around one billion dollars of U.S. beef per year prior to our trade conflicts. So, prospects of negotiations with China on trade will likely have impacts on the cattle markets as well as a number of other important agricultural products.
In the Cattle on Feed report, USDA indicated a two percent increase in the numbers on-feed which was a record large inventory for July dating back to 1996 when they started just reporting on feedlots with 1,000 head of capacity or larger. While a record, the numbers were in line with expectations prior to the report.
While there are more animals on-feed the mix of steers and heifers provides further evidence that brood cow producers are sending more heifers to the feedlots rather than holding them back for breeding stock compared to a year-ago. While total numbers on-feed are up two percent, the number of steers are down two percent but heifers are up eight percent from last year. This lends additional support to the idea of leveling off of the brood cow expansion.
Domestic beef production so far this year has been near unchanged with one percent more animals being offset by one percent lighter market weights. For the remainder of the year, numbers are expected to rise about two percent, but with a continuation of lighter marketing weights, beef supplies may only rise by a modest one percent.
Higher feed prices will generally support lighter marketing weights for the rest of this year and into 2020. Reduced production of corn and soybeans will increase the costs of energy and protein in diets, but cattle also utilize grazing and forages. The adverse 2019 planting season has opened opportunities to graze and harvest cover crops on prevented plant acres including corn silage starting September 1. In some areas this may increase feedstocks substantially and keep forage prices from rising.
But in other regions, spring crop planting was not as delayed and cattle concentrations may...