Is the Cowherd Liquidation Pendulum Ready to Swing?

February 5, 2013 10:48 PM
Is the Cowherd Liquidation Pendulum Ready to Swing?

Friday's USDA cattle inventory report didn't come as a big surprise to anyone. The drought and high feed prices have kept the industry in liquidation mode rather than expansion for a couple of years now.

The report showed overall cattle inventory numbers are at their lowest level since 1952. Beef cow numbers are at their lowest level since 1962 and the calf crop is the smallest since 1949.

According to Purdue University Economist Chris Hurt, the 2012 drought was just the latest event to result in the liquidation of cows that has been accelerating since 2007. Nationally, the beef cowherd has dropped by 3.6 million head (11%) with reductions in all regions except the northern Plains. "It has been difficult for the beef industry to compete for high-priced feed and limited land that is being converted to corn and soybean production," he says.

Is the pendulum ready to swing? Some analysts expect this to be the bottom in terms of cow numbers and that expansion will happen as long as it rains. And USDA's report indicates that heifer expansion may already be underway as the number of heifers being held back as replacements was up 2% overall. What is surprising is that in states like Texas and Arkansas, heifer retention is up 9% and 12% respectively.

Beef Heifer Replacement map

When you look at the production herd, the number of beef cows that calved has declined in drought impacted states, while increases are reported in northern states.

Beef Cows that Calved map

But the current inventory report only tells part of the story. Derrell Peel, Oklahoma State University Extension livestock marketing specialist says that while the overall cattle inventory was unchanged, revisions to the 2012 numbers in several categories affect the interpretation of the report. 

"The estimated inventory of beef cows on January 1, 2013 was 29.3 million head, down 2.9% from last year.  However, the estimate for January 1, 2012 was increased by 275,000 head, which means that the decrease from 2011 to 2012 was not as severe as earlier indicated," he says. "Though the drop in beef cow numbers in 2012 was larger in percentage terms than pre-report estimates, the overall level of inventory is pretty close to what was expected.  In other words, we had a bigger drop from a bigger total and ended up about where we thought we would be.  Almost all of the revision in beef cow numbers was in Oklahoma and Texas suggesting that cow liquidation in 2011 was not as severe as earlier estimated in those two states. By contrast, Texas lost even more beef cows in 2012, down 12%, while Oklahoma beef cow numbers dropped a modest 1.3% in 2012."

The estimate for beef replacement heifers was also revised in the new report.  For January 1, 2012, an additional 50,000 head of beef replacement heifers was added to the estimates for Nebraska and Oklahoma.  This means that the inventory of beef replacement heifers at the beginning of 2012 was up 2.4%.  The estimated inventory of beef replacement heifers for January 1, 2013 was up 1.9% year over year. 

"The replacement heifers indicate, more than anything else, the contrast between what the industry would like to do compared to what they are able to do," says Peel. " Though the 2012 inventory of beef replacement heifers was up, the drought and continued beef cow liquidation meant that a very low percentage of those potential replacement heifers actually entered the herd.  The 2013 numbers show are even more pronounced in this respect.  The 2013 beef replacement heifer inventory is 18.3% of the beef cow herd inventory, the highest replacement percentage since 1995.  However, it depends entirely on whether drought condition moderate to determine what percentage of those heifers may actually enter the herd in 2013." 

Peel says that for significant expansion, we'll have to see a large drop in beef cow slaughter combined with a high percentage of this heifer pool to stay in the herd to achieve more than stabilization of beef cow herd numbers. 

"Limited beef cow herd expansion is possible in 2013 but it will require almost perfect conditions with respect to cow culling and heifer placement," says Peel. "The ongoing drought conditions do not make that likely."


Back to news



Spell Check

No comments have been posted to this News Article

Corn College TV Education Series


Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!


Market Data provided by
Brought to you by Beyer