It would seem that US cow/calf producers would like to keep more cows and maybe a heifer or two to start rebuilding the total herd, but it’s hard to tell just yet.
Cow slaughter numbers are falling, but it may not be a sign of rebuilding just yet, a market analyst said. Producers may just be running short of cows available to cull as drought-stretched grazing may be enough to support a herd of this size.
INVENTORY MADE WEAK UPTURN
The July 1 cattle inventory by the USDA’s National Agricultural Statistics Service showed a total inventory of 94.2 million head, up from 94.0 million a year earlier. Of this, 28.45 million head were beef cows, and 9.65 million were dairy cows, compared with 28.65 million and 94.5 million, respectively, a year earlier.
So, it looks like dairy cows helped to support the total cow inventory more than beef cows.
Adding to the formula, the USDA reported an increase in beef-breed heifers being kept for cow replacements in the July 1 count. The new number was 4.714 million head, up 0.9% from 4.673 million a year earlier.
Part of the reason for the subdued market response to these numbers was the knowledge that these heifers could have their date with destiny changed in the last half of the year. Continued, or worsening drought, weather conditions, wheat grazing opportunities or other market factors could encourage cow/calf producers to send these heifers to the feedlots rather than spend the money to keep them as cows.
If feeder cattle prices decline, it will cost producers less in lost-opportunity costs to keep them for breeding, the market analyst said. Higher feeder cattle prices tend to draw heifers away from producers unless there is a strong desire for more cows and the producer can afford to feed and keep them.
What the rise in kept heifers tells the market, though, is that there is a desire among producers to have more cows producing calves. They may be taking baby steps, but the desire is there.
FEEDER CATTLE SUPPLIES DOWN
What that increase in kept heifers produced was a reduction in estimated feeder cattle numbers outside of feedlots. On July 1, there were an estimated 33.6 million head of feeder cattle not yet in a feedlot. This was down 33.8 million a year earlier.
The lower supplies of feeder cattle outside of feedlots could raise prices and draw heifers away from a career as brood cows and into the feedlots.
And a lot of that will depend on beef demand, the analyst said. Consumers have ridden the rising cost of beef far longer than many had expected and just now are showing signs of switching to alternative protein products.
However, the Labor Day holiday is approaching, followed in a couple of months by the Thanksgiving, Christmas and New Year’s holidays. Seasonal beef demand could rise again, increasing demand for fed cattle, which increases feeder cattle demand.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $233.33 per cwt to $233.54, compared with last week’s range of $230.68 to $237.92 per cwt. FOB dressed steers and heifers went for $363.26 per cwt to $363.56, compared with $361.74 to $377.75.
The USDA choice cutout Monday was up $5.35 per cwt at $366.73 while select was down $1.78 at $344.45. The choice/select spread widened to $22.28, from $15.15 with 63 loads of fabricated product and 22 loads of trimmings and grinds sold into the spot market.
The USDA-listed the daily weighted average wholesale price for fresh 90% lean beef as $462.77 per cwt, and 50% beef was $141.94.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged to up $0.01 at $1.18 to $1.34 a bushel over the Sep corn contract, which settled at $4.49 3/4 a bushel, up $0.09.
The CME Feeder Cattle Index for the seven days ended Friday was $346.89 per cwt, up $1.06. This compares with Monday’s Aug contract settlement of $348.30 per cwt, up $0.27.