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CME: Beef Replacement Numbers Revised Down

04 March 2019

US - The 1 January US cattle inventory survey results were released on Thursday afternoon (28 February), reports Steiner Consulting Group, DLR Division, Inc.

Below are some of the highlights and implications:

First note the revisions to year ago numbers, especially if you maintain a historical series. All numbers were updated, some more than others. The biggest revision was in the size of the beef cow herd on 1 January 2018.

According to the latest report, the breeding herd at the start of last year was 256,800 head or 0.8 percent smaller than earlier thought.

Beef replacement numbers were revised down by 0.4 percent while cow replacement numbers were revised down 0.3 percent. USDA revised up 1.1 percent the inventory of +500lb steers as the start of last year.

The USDA survey suggests the calf crop in 2018 was 1.8 percent higher than the previous year. This is higher than the 1.6 percent increase analysts were expecting and tells us that an additional 645,000 head more calves were born in 2018.

In 2017 the calf crop increased by 1.9 percent or 666,000 head. This is the fourth consecutive year that the calf crop has increased vs. the previous year and suggests higher cattle/beef supplies into 2020.

While beef production will likely slow down by 2020, the pace of beef supply growth will not exactly mirror the trend in the calf crop. Herd rebuilding or liquidation efforts could either accelerate or slow down the trend.

The reason for expecting a slowdown in beef production growth has to do with the size of the cow herd and potential calf crops in 2019 and 2020. The beef cow herd as of 1 January 2019 is currently estimated at 31.766 million head, 1 percent higher than the previous year.

The beef cow herd expanded by 2.9 percent in 2016 and 3.5 percent in 2017. Those two big growth years resulted in a notable increase in the number of calves born and have fueled the increase in US cattle numbers so far.

However, in the last two years the beef cow herd has increased by 0.8 percent and 1 percent. Producers are holding back fewer heifers for herd replacement and a higher culling rate could result in a decline of the beef cow herd by next year.

The milk cow inventory on 1 January was 0.8 percent lower, which was close to expectation since USDA tracks the milk cow numbers monthly.

The total cow herd as of 1 January 2019 was only 0.5 percent higher than the previous year, implying a very modest increase in the calf crop during 2019.

As the growth in the size of the calf crop moderates, so will forecasts for beef supply growth in the next two to three years. But note that, at this point, we are not talking about a contraction.

This could change if we see a shift in the cull rate of beef and dairy cows in the next 12 months but for now the cattle cycle remains in growth, albeit very slow, phase.

The supply of feeder cattle outside feedlots as of 1 January was estimated at 26.380 million head, 255,000 head or 1 percent higher than a year ago. Please note this number is not adjusted for the small number of cows and bulls on feed.

Lower placements in the last four months of 2018 mean more cattle will be available for placement this spring.

The total supply of cattle on feed, which includes small feedlots, was estimated to be 14.371 million head on 1 January, 1.6 percent higher than the previous year.

This growth rate is quite comparable from that in the +1000 head capacity monthly feedlot survey, which showed on feed supplies on 1 January were up 1.7 percent compared to a year ago.

Nebraska inventory was down 1.8 percent and Kansas inventory was down 0.8 percent. However, there was a notable increase in Texas on feed inventories, up 3.8 percent vs. year ago.

Feedlot inventories in some smaller states made notable gains, e.g, Illinois (+14 percent), Idaho (+11 percent), Indiana (+11 percent), Ohio (+7 percent), California (+9 percent). Gains in these five states were bigger than those in Texas (125k vs. 100k in TX).


Daily Livestock Report - Copyright © 2008 CME. All rights reserved.


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