Beef Cow Herd Liquidation End May Be Near: Peel

Drought-forced beef cow herd liquidation has made the industry smaller than it needs, or planned, to be, said Oklahoma State University Livestock Marketing Specialist, Derrell Peel, said in a letter to Extension agents called Cow-Calf Corner.

There will be strong market incentives to rebuild herds when it is possible to do so, he added.

Recent drought improvement in the central and southern Plains likely means herd liquidation is ending, he said.  Drought could redevelop, but the arrival of El Niño likely indicates additional drought effects will be minimal.

Nevertheless, the 2023 beef cow herd is almost surely decreasing, meaning the Jan. 1, 2024, level could be the low from which the industry will rebuild, he said.

 

WHAT ABOUT THE TIMELINE?

 

The first step to stabilizing the beef cow herd is reducing cow culling and slaughter, Peel said.  Following record culling in 2022, beef cow slaughter is down 11.5% so far in 2023, a sign that herd liquidation is slowing.

However, he suspected that, until recently, the decrease in total beef cow slaughter was masking continued liquidation in remaining drought areas of the plains.  The current rate of beef cow slaughter, if it persisted for the entire year, would result in a culling rate of nearly 11%.

Many expect beef cow slaughter to decrease more sharply in the second half of the year, Peel said.

 

WATCH HEIFER RETENTION

 

The definitive indication of herd expansion will be signs of heifer retention, he said.  Currently, no such signs exist.

In fact, 2023 heifer slaughter is fractionally more than last year’s elevated level, Peel said.  But reduced heifer feedlot placement that follows increased heifer retention will show up as lower heifer slaughter only after several months.

The Jan. 1 inventory of beef replacement heifers, consisting of bred heifers calving this year and replacement heifer calves to breed for 2024 were very low, Peel said.  The bred heifer inventory was the lowest since 2011 and the inventory of replacement heifer calves was the lowest in the 23 years of data available.

The number of replacement heifers is not enough to prevent more herd liquidation this year and likely not enough to do more than stabilize the beef cow herd in 2024, Peel said.  The big push for heifer retention likely will begin with weaning heifers this fall.

Those heifers will be bred in 2024, calve in 2025 and begin to increase beef production in 2026, he said.

In the meantime, heifer retention and reduced beef cow slaughter will reduce cattle slaughter and beef production, Peel said.  In the last herd expansion that began in 2014, total cattle slaughter in 2015 dropped to the lowest levels since 1963, resulting in the lowest beef production since 1993.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $182.00 per cwt to $191.00, compared with last week’s range of $180.00 to $191.90 per cwt.  FOB dressed steers, and heifers went for $286.23 per cwt to $295.18, compared with $284.05 to $299.87.

The USDA choice cutout Thursday was up $0.22 per cwt at $334.47 while select was off $0.45 at $303.80.  The choice/select spread widened to $30.67 from $30.00 with 70 loads of fabricated product and 17 loads of trimmings and grinds sold into the spot market.

The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.35 to $1.55 a bushel over the Jul corn contract, which settled at $6.60 1/2 a bushel, down $0.10 1/2.

No deliveries were tendered against Jun live cattle Thursday.

The CME Feeder Cattle Index for the seven days ended Wednesday was $221.73 per cwt, down $0.45.  This compares with Thursday’s Aug contract settlement of $230.67 per cwt, up $2.95.