The US beef cattle industry is transitioning from aggressive herd expansion to very modest growth, which will translate into a rather modest annual increase in beef production next year, said the Livestock Marketing Information Center in a midyear industry analysis and outlook.
That analysis will be dealt with today and tomorrow, with today dealing with the generalities of where the market is and tomorrow dealing more with prices and market interactions.
If current market trends persist, 2020 could mark the then of the cattle herd buildup, the LMIC said.
HERD GROWTH SLOWING
The USDA’s National Agricultural Statistics Service’s mid-year Cattle inventory report July 20 confirmed that the national herd still is growing, but at a moderating pace compared with that of recent years. At 103.2 million head, the number of cattle and calves was 1.0% more than a year earlier continuing a growth trend begun in 2013. It was the largest herd since July 1, 2008.
The 2018 number of cows that had calved was 41.6 million, of which 32.2 million were beef-type. The beef cow herd was UP by 300,000 head, or 0.9%, year-over-year.
BEEF PRODUCTION RISING
In 2016, US commercial beef production was 25.2 billion pounds, up 6.4% from 2015. Last year, output rose to 26.2 billion pounds, or 3.8%. The LMIC projected this year’s beef tonnage at 27.3 billion pounds, up 4.2% from 2017.
The 2019 beef production forecast, assuming normal weather, was for about 27.7 billion pounds, up 1.4% for the year. This would be the smallest percentage increase since 2015, the last year to record a decline. Preliminary forecasts place 2020 beef output in a range from 2019’s 27.7 billion pounds to up 2%.
ADAPTATION
The beef pipeline has adapted to increasing tonnage and rising competing animal protein supplies. A strong domestic economy and robust exports have supported the demand profile for beef and cattle.
In addition, featuring of beef in grocery store advertisements and in restaurants remained in fashion, a trend that began last year. During the first six months of 2018, substantial profits made packers aggressive buyers of slaughter-ready animals, and cattle feeders were willing sellers with huge profits of their own, which pumped up feeder cattle prices.
This year, fed cattle prices were expected to average 4% to 5% below 2017’s, the lowest annual average since 2011. In contrast, calf and yearling prices were expected to be very similar to 2016 and 2017.
There are unknowns and potential headwinds, not the least of which is the potential for US beef, pork and chicken exports to falter under a cycle of tariffs and retaliation. Also, any significant weakness in the domestic or global economy compared with the healthy conditions of the last year could dampen demand for beef and, therefore, cattle.
CATTLE, BEEF RECAP
No fed cattle sales were reported Wednesday on the Livestock Exchange Video Auction. A week earlier, 851 head sold at an average price of $110.07 per cwt, down from the last sale at $112 two weeks previous.
Cash cattle trade took place last week at $110 to mostly $111 per cwt on a live basis, down $3 from the previous week, and at $175 to $179 dressed, down $3 to up $1.
The USDA choice cutout Monday was up $1.82 per cwt at $208.43, while select was up $1.89 at $199.66. The choice/select spread narrowed to $8.77 from $8.84 with 77 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday, was $151.12 per cwt, unchanged. This compares with Monday’s Aug settlement of $148.65, down $1.25.