Expansion Confirmed

August 25, 2015 06:50 PM
Expansion Confirmed

The U.S. mid-year cattle inventory increased for the first time in nine years. USDA’s Agricultural Statistics Service counted 98.4 million cattle and calves as of July 1, 2015, an increase of 2.2% over last year.
The report confirms that the U.S. cow herd is in full expansion mode.

“The beef cow herd numbers are 2.5% higher,” says John Nalivka, president of Sterling Marketing, Vale, Ore. “That suggests producers are building herds. But the strongest evidence is the 17% year-to-date decline in beef cow slaughter and a 10% decline in heifer slaughter from a year ago.”

Nalivka says the inventory report and slaughter data are evidence a large share of heifers that were called replacements on Jan. 1 were, indeed, bred, did calve and are now included in the cow herd.
Regarding the calf crop, USDA’s mid-year report suggests a 400,000 head increase to 34.3 million, a number some believe may go higher by the time the Jan. 1, 2016, report is released.

Given the rapid rise in calf prices this past year that produced historic returns to ranch operations, analysts expected aggressive expansion to begin.

Cow herd expansion began briskly in 2014, says Oklahoma State University Extension beef specialist Derrell Peel, with a “faster-than-typical early growth” that was a reflection of suppressed expansion desires due to the drought.

“Though producers were forced to liquidate cows during the drought years of 2011 to 2013, they continued to add heifers to the herd to be ready to expand when the opportunity arose,” Peel says. “The resulting cow herd is young and productive and allowed for a sharp drop in beef cow culling in 2014 with a culling rate of 8.8%, down from 10.6% in 2013.”

Abundant moisture over the primary gazing regions in the Central Plains further ensures that expansion will continue, possibly for the remainder of the decade.

“Historical relationships between the estimated July beef cow inventory and the following Jan. 1 inventory suggest a January 2016 beef cow inventory of just over 30 million head, representing just over 1% growth in 2015,” Peel says. “However, beef replacement heifers were up 4% on Jan. 1, 2015, and were up 6.5% on July 1, indicating more aggressive herd expansion.”

Early analyst projections suggest the Jan. 1, 2016, inventory of beef cows will surpass 30 million for the first time since 2012. Nalivka estimates the report will show 30.7 million beef cows and a total inventory of 91.9 million head—a 3.5% increase in the cow herd and a 2.4% increase in the total herd.

Such an aggressive increase in the cow herd inventory would represent a 1 million head increase from 2015 and just 200,000 head shy of the pre-drought 2011 level of 30.9 million head. A larger calf crop in 2016 will increase beef production in 2017—a trend that will pressure beef prices with increased production, and the cycle begins again.

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Spell Check

Decorah, IA
9/1/2015 08:19 AM

  I wonder what the margin of error is. It would seem that retention of heifers an cows would put a pinch on boxed beef. And 2.4% considering heifers that don't stick or lose calves and older cows that don't re-breed also drops the numbers. Those retained cattle will put beef in the packing plant in about two years ..... So why the big drop now?


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