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Market Advisor: Cattle Herd Continues to Shrink

Cow-calf producers continued a second year of beef cow liquidation that started in 2007.

By Tim Petry, Livestock Marketing Economist

NDSU Extension Service

The USDA’s National Agricultural Statistics Service (NASS) Jan. 1 cattle inventory report released on Jan. 30 shows a continued decline in U.S. cattle inventory.

The fact that the cattle herd declined was not a surprise to the cattle industry, but NASS also revised downward its previous estimates for Jan.1, 2008.

A revision statement said that all inventory and calf crop estimates for Jan.1, 2008, were reviewed using the calf crop, official slaughter numbers, import and export data, 2007 Census of Agriculture data and the relationship of new survey information to prior surveys.

Based on the findings of this review, adjustments were made to the previous inventory estimates. Revisions to estimates were made at the national and state level and will be republished in a “Cattle, Final Estimates 2004-2008” publication scheduled for release on March 5.

All cattle and calves on Jan. 1 totaled 94.5 million head, a 1.6 percent decline from last year’s revised figure of 96 million. The previously reported inventory for 2008 was 96.7 million head. Therefore, the numbers are down almost 2.2 million.

Other selected revisions for 2008 include beef cows down 118,000 head, dairy cows up 33,000, beef replacement heifers down 23,000 and the 2007 calf crop revised downward by 602,000 head.

Cow-calf producers continued a second year of beef cow liquidation that started in 2007.

Both beef cows that have calved and beef heifers for replacement declined more than 2 percent from the previous year. Drought in important cattle-producing regions in the U.S. and rising feed costs in 2007 likely caused the cow liquidation to start. In 2008, a continued increase in production costs, along with sharply declining cattle prices in the last half of the year, fueled the continued liquidation.

Beef cows for slaughter were up 13 percent in 2008.

No expansion in beef cow numbers is expected in 2009 because of the lower number of replacement heifers that will be retained and lower cattle prices due to the economic crisis.

Dairy cow numbers were up almost 1 percent at 9.3 million head. The increase was prompted by favorable milk prices in 2007 and the first half of 2008. However, milk prices at the farm level have crashed, so liquidations likely will occur in 2009.

The 2008 calf crop was down 646,000 and reported by NASS at 36.1 million head. In spite of that, the combined total of feeder cattle outside of feedlots was up 1 percent at 27.5 million head. Fewer calves were marketed in the fourth quarter of 2008 due to very low prices and ample forage in some regions.

Therefore, there may be more feeder cattle marketed in the first part of 2009 than in 2008.

Cattle on feed for slaughter numbers reflected lower calf marketing because there were only 13.9 million head on feed on Jan. 1, compared with 14.8 million the previous year, a decline of almost 7 percent.

Generally, North Dakota numbers followed the national trend with all cattle down more than 3 percent and beef cows down more than 4 percent on Jan. 1. Dry weather in the western part of the state certainly was a contributing factor in the decline.

However, heifers kept for beef cow replacement in the state bucked the national trend because it was reported to be up 9 percent. The extremely low prices for heifers last fall probably caused producers to keep more heifers. Some of these heifers may not enter the cow herd. Instead, these heifers may be marketed as feeders before they are bred.

Usually, a decline in U.S. numbers, coupled with a downward revision in the previous year’s inventory, would be very supportive to prices and eventually it will be.

However, current prices are being impacted negatively by the economic meltdown and struggling beef demand in the domestic and export markets.

How long this recession lasts domestically and internationally is anyone’s guess, but a recovery is the key to higher cattle prices. The new administration and Congress are addressing the situation, but a recovery likely will be a slow process.

Assuming modest recovery occurs later in year and with the lower cattle numbers, 2010 should see better cattle prices, with 2011 and later looking even better!


NDSU Agriculture Communication

Source:Tim Petry, (701) 231-1059, tim.petry@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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