While Friday’s USDA Cattle on Feed report was considered neutral to many cattle market analysts, the midyear USDA Cattle Inventory report could be considered bearish to feeder cattle prices.
The number of cattle in the herd grew, forcing the rate of female slaughter up and increasing the number of feeder cattle available for placement into feedlots. However, there were signs of herd-growth abatement in that the number of heifers held as beef cow replacements declined from a year ago.
TOTAL HERD GROWTH
The report showed the number of all cattle and calves in the US on July 1 at 103 million head, up 1 million, or 0.98%, from 102 million a year earlier. This was something of a surprise to many who expected the herd to be showing signs of slowing growth.
The growth came from a forecast increase in the 2018 calf crop, which was expected to be 36.5 million head, up 692,000, or 1.93%, from last year’s 35.808 million, and from growth in the number of heifers weighing 500 pounds or more. These heifers totaled 16.3 million head on July 1, up 100,000, or 0.62%, from 16.2 million on July 1, 2017.
Many had expected an increase in the number of female slaughter to be evidence of a slowdown in heifer retention and an increased rate of cow culling.
As it turns out, the increase in female slaughter now appears to be a natural result of a herd that it approaching full desired capacity. More older cows can now be culled, and more heifers are being slaughtered mostly because there are more of them to slaughter, a market analyst said.
STILL SIGNS OF ABATEMENT
However, there were signs of abatement, as the number of heifers kept as beef cow replacements dropped from a year ago to 4.6 million head from 4.7 million, a decline of 100,000, or 2.13%.
The implications of this decline point to declining numbers of available feeder cattle in coming years. Even though the report showed increased supplies currently.
The number of calves weighing less than 500 pounds totaled 28.4 million head, up 500,000, or 1.79%, from 27.9 million a year earlier. And more were expected with a 2018 calf crop expected to be about 2% higher than last year, feedlots should be able to find calves to fill their pens, the analyst said.
In fact, the July 1 total herd count shows no signs of abating. It hasn’t reached the levels seen in many previous years, but the rate of year-over-year increase is consistent with previous periods of herd growth.
The problem is the July 1 herd count is more tentative than the Jan. 1 inventory. Heifers can go either to the herd or feedlots depending on conditions.
CATTLE, BEEF RECAP
One pen of fed cattle sold on the Livestock Exchange Video Auction Wednesday at $112 per cwt, up $6 from the last sale three weeks previous.
Cash cattle traded Friday afternoon at $112 to $113 per cwt on a live basis, up $2 from the previous week, and at $178 to $180 on a dressed basis, up $5.
The USDA choice cutout Friday was down $0.32 per cwt at $204.17, while select was up $0.08 at $197.00. The choice/select spread narrowed to $7.17 from $7.57 with 49 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Thursday, was $148.02 per cwt, down $0.29. This compares with Friday’s Aug settlement of $153.67, down $0.77.