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Market Advisor: U.S. Cattle Herd Continues to Decline

The prices for all market classes of cattle declined sharply in the second half of 2008, which also reduced profitability in the cattle sector.

By Tim Petry, Livestock Marketing Economist

NDSU Extension Service

U.S. cattle numbers declined for the third straight year, according to the semiannual cattle inventory report released by the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) on July 24.

NASS pegged the cattle herd at 101.8 million head, which is almost 1.5 percent or 1.5 million head of cattle fewer than last year. The decline was expected because of drought conditions that have occurred in several cattle-producing areas, including North Dakota, during the last several years. The higher feed, fuel and fertilizer costs that beef cattle producers experienced last year also added to herd reductions.

The prices for all market classes of cattle declined sharply in the second half of 2008, which also reduced profitability in the cattle sector.

Beef cow numbers declined by 450,000 head (32,650 million to 32,200 million). That is a decline of about 1 million head from five years ago and 2 million head from 10 years ago. Pasture and range conditions have improved in several areas, with exceptions in the southern Plains. Feed, fuel and fertilizer costs have declined from last year, so the beef cow slaughter declined about 6 percent.

However, heifers kept for beef cow replacement were down more than 2 percent from last year, so very little beef cow herd rebuilding is likely in the next year. The number of heifers for replacement retained this fall and next spring will depend on pasture and range conditions, plus producers’ expectations of future industry profitability.

Dairy cow numbers fell from 9.35 million head last year to 9.2 million. The dairy industry has suffered sharply lower prices and very negative margins this year, which has led to higher dairy cow slaughter.

The number of heifers for dairy cow replacements was reported by NASS to be the same as last year. Given the poor profitability in the industry, that number may be surprising to some. However, the increased use of sexed semen has led to more dairy heifers being born, and profitability in the dairy industry was good the first part of 2008.

The estimate of the 2009 calf crop, which includes both beef and dairy calves, was 35,600 million head, which is down about 1.4 percent from last year.

The number of feeder cattle and calves outside of feedlots was down about 200,000 head and the number of cattle on feed was down 600,000. Therefore, steer and heifer slaughter likely will be down in 2009 and 2010.

Typically, reduced slaughter would be supportive to prices. However, both the domestic and export market demand for beef are struggling because of the worldwide economic woes.

Fed-steer prices are more than $11 per hundredweight less than last year, with the choice beef cut-out value down $17.

When beef demand will return to pre-economic crisis levels is anyone’s guess. When that does happen, the lower beef supplies will be supportive to cattle prices.


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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