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CME: US Cattle Numbers Continue to Increase

07 March 2016

US - The general theme in the US cattle market in the last two years is that cattle numbers are slowly increasing and expansion will continue to gain steam in the next couple of years. If we zoom out just a little bit, however, we will notice that the same cannot be said for our partners to the North and South, write Steve Meyer and Len Steiner.

And this is important since the number of Canadian and Mexican cattle in our slaughter mix is not insignificant. In 2015, imports of Mexican cattle (almost all feeder cattle) were 1.154 million head.

Imports of Canadian cattle (a combination of feeder and slaughter cattle) were 830,479 head. Total US cattle slaughter in 2015 was 28.7 million head, implying that Canadian and Mexican born cattle account for around 7 per cent of the number of cattle going into US slaughter plants.

The January 1 cattle inventory in Canada was reported by Statistics Canada at 11.960 million head, just 40,000 head (+0.3 per cent) higher than a year ago.

More important for future growth is the supply of beef cows available and the success of Canadian producers (or lack thereof) to expand the beef cow herd.

The total beef cow inventory was 3.830 million head, slightly lower than a year ago (-0.04 per cent). The number of heifers retained for beef cow replacement was 547,300 head, 4 per cent higher than a year ago.

Canadian producers have been retaining more heifers for beef cow replacement since at least 2010 but that has had little impact on overall beef cow numbers. High cattle prices in the US (especially cow prices) and a shift in exchange rates has contributed to an increase in the number of Canadian cows and bred heifers going into the US.

And the oufllow of Canadian slaughter cows continues.

In the last six reported weeks, total shipments of Canadian slaughter cows to the US were 35,441 head, 12,080 head (+52 per cent) higher than the same period a year ago.

Interestingly, US cow slaughter during this period was down about 4600 head (-0.7 per cent) from a year go. Without the inflow of these Canadian cattle, US cow slaughter would have been down 2.5 per cent. The broader context, however, is that North American inventories continue to be quite a bit lower than what they were 10 to 15 years ago and so far Canada and Mexico have not participated in the herd rebuilding activity.

This is different from what is happening in South America, where Brazil, Argentina and Uruguay are all quickly rebuilding their herds. Consider these numbers. At this point we do know the US cattle inventory as of January 1 was 91.988 million head (+2.8 MM) and the Canadian January 1 inventory was 11.960 million head (+40k).

USDA estimates the Mexican January 1 cattle inventory at 16.450 million, down 670,000 head.

The combined North American cattle inventory on January 1 thus is estimated at 120.4 MM head, 2.2 million head (+1.9 per cent) higher than a year ago but still 13.8 million head (-10.3 per cent) from what it was in 2005.

Now consider the January 1 inventories in Brazil, Argentina and Uruguay. These are the equivalent of our July inventories but we are looking at the trend here. According to USDA, their combined inventory as of January 1 was 283.2 million head, 6.5 million head (+2.4 per cent from a year ago). Since 2005, their inventory has increased by 47.3 million head (+20 per cent). If we were to also add the Indian buffalo growth, the numbers become staggering. And ultimately that is what is driving the retreat in global beef prices.

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