Published on: 06:56AM Feb 05, 2009
The chart of the week is the January 1 US cattle and calf inventory. Twice a year (Jan and July) the USDA gives us an estimate of the total US cattle herd and various subgroups (not be to confused with the monthly cattle on feed report which just gives us cattle in feedlot numbers). Last Friday, the USDA released their latest total cattle and calf estimate for the US which was 1.6% less than last year and the smallest since 1959. Why is the cattle herd shrinking and what does this mean for beef supplies going forward? Well, as documented in prior notes, cow/calf producers have been challenged during the last few years by poor margins brought on in part by inflated feed costs. Sound familiar? So there has been a notable decline in the US cattle herd. In fact it’s the biggest annual decline since 1998. Now don’t let the detail that the cattle herd is the smallest in 50 years scare you because we certainly don’t expect beef production to the smallest in 50 years. Weight gains and continued liquidation in the cattle herd, amongst other factors, are expected to cause beef output to only trend modestly below 2008 this year. That being said the decline in the cattle herd paints a picture of declining beef production for at least the next few years. And when this economy starts to improve, waning beef production could be especially bullish for the beef markets.
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