Should the beef cow herd stabilize near current levels, as it appears now, the cattle slaughter mix could return to long-term averages next year, said Derrell Peel, Oklahoma State University extension livestock marketing specialist.
Writing for Extension agents, Peel said 2018 cattle slaughter was projected at 33.15 million head, with steer slaughter at 51.3% of the total compared with a 50.7% long-term average; heifer slaughter of 28.0%, vs a 29.9% average, and cow slaughter of 19.0%, vs 17.7% average.
That includes beef cow slaughter, projected at 9.4% of 2018 slaughter, compared with a 9.3% long-term average, and bull slaughter at 1.7%, close to the long-term average of 1.8%.
The beef cattle industry has experienced extraordinary dynamics in the past decade that provoked unprecedented volatility and record prices, Peel said.
An aborted expansion attempt in the mid-2000s was followed by more herd liquidation through 2010, followed by even more drought-forced liquidation in 2011-2013 that took cow numbers two million head lower than anyone planned or the market needed, he said.
This provoked a dramatic market response to jump-start expansion, Peel said. Only now are herd dynamics returning to normal.
The beef cow herd likely increased less than 1% from last year in 2018 to a projected Jan. 1, 2019, level of about 31.9 million head, he said. This may be the cyclical inventory peak or very close to it.
From the 2014 low of 29.1 million head, expansion has increased the beef cow herd by 2.8 million head, or 9.6%, over five years. The last full cyclical herd expansion occurred in 1990-1996 resulting in an 8.8% expansion in six years.
HEIFER RETENTION FEEDS HERD EXPANSION
Part of herd expansion is heifer retention, commonly measured by the Jan. 1 inventory of beef replacement heifers as a percent of the beef cow inventory, Peel said. This percentage has averaged 17.6% over the last 30 years. It rises above average during herd expansion and drops below average during liquidation.
From a recent low of 16.6% in 2011, the replacement heifer percentage increased rapidly and averaged more than 20% from 2015-2017, he said. The 2016 peak of 21% was the highest since historic herd growth in the 1960s.
The percentage dropped to 19.3% in 2018 and was projected to drop to 18.0% to 18.5% in 2019 — still above average but closer to normal, Peel said.
Increased heifer retention reduces the number of slaughtered heifers, increasing the ratio of steers to heifers which has averaged 1.71 over the last 30 years.
The ratio increased to 2.143 in 2016, the highest since the early 1970s, and has been moving back to more typical levels since, he said. The ratio dropped to 1.948 in 2017 and is projected at about 1.83 in 2018.
Annual heifer slaughter was up by 11.9% in 2017 and was projected to be up 6.0% to 6.5% again in 2018, Peel said as heifer slaughter returns to normal.
The other part of herd expansion is reduced cow culling, Peel said. Annual beef cow slaughter as a percent of Jan. 1 beef cow inventory has averaged 9.5% over the last 30 years.
Beef cow slaughter dropped sharply from 2012 to 2015 resulting in a record-low beef cow culling percent of 7.63% in 2015 and a below-average rate from 2014-2017, he said. Beef cow slaughter has seen annual increases averaging 11% since 2016, including a projected 10.1% increase in 2018.
At the current rate, 2018 beef cow culling will be 9.7%, very close to the long-term average, Peel said.