Is Cattle Herd Growth Rate Declining?

The US cattle herd continues to expand, but the rate of growth may be slowing as average returns to cow/calf producers decline.

USDA data compiled by the Livestock Marketing Information Center show that returns to producers spiked in 2014 to a record high of $530.22 per cow but dropped to $303.08 by 2015, which was still the second highest on record but still a decline of $227.14, or 42.8%.

Returns were projected to deteriorate a further $$226.03, or 74.58%, to $77.05 this year, a rate of decline that is sure to get the attention of more than a few producers.




And there are indications that producers may be slowing their rate of heifer retention in response to the falling rate of return, although it’s too soon to say for certain.

As the US herd liquidation phase ended with 2014’s 60-year low of 88.526 million head, the cow herd was necessarily pulled lower and the average age of the cows became younger.  Cow/calf producers were more likely to cull older cows than younger ones during the process because they were more likely to have age-related health issues.

But now that the herd is growing, reductions to the rate of growth will be just as likely to come from a reduced rate of heifer retention as with an increased rate of beef cow slaughter.  Producers have already invested in those animals already in the herd and will be less likely to earmark heifers for retention if they do not intend to cull a like number of older cows.  Similarly, they will be just as likely to return to seasonal cull patterns for their cows since there still are older cows in the herd.

And that may be what is happening.  Agricultural Marketing Service and National Agricultural Statistics Service data compiled by the LMIC show an increased rate of heifer slaughter since bottoming the last week of May at 117,560 head.

Heifer slaughter rates since the bottom have tended to drift higher, finally diverging from last year around the second week of July.  The rate of heifer slaughter has tended to follow the 2010-2014 seasonal average but at a lower rate.

The problem for cattle investors is that they won’t know until fall if what they are seeing now is a true slowing of the herd growth rate or just a seasonal turn higher.  Comparing it to last year may be a mistake since 2015 was a year of active herd growth that would tend to pull heifer slaughter lower and away from seasonal tendencies.




The beef cow slaughter rate has returned to seasonal patterns and has diverged upward from last year since March.  It remains above 2015, but weekly numbers are tracking the five-year average rather than last year, and the gap above last year is growing.




Cash cattle markets Wednesday were quiet with prices steady with Monday at $110 per cwt on a live basis and $175 dressed.  Prices were $4 to $5 lower than last week live and $5 to $8 lower dressed.

The USDA’s choice cutout Wednesday was $0.13 per cwt lower at $196.49, while select was off $1.46 at $189.71.  The choice/select spread widened to $6.78 from $5.45 with 130 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Tuesday was $143.71 per cwt, down $0.47.  This compares with the Aug settlement Wednesday of $140.52, down $2.00.