Discerning The Start Of Herd Rebuilding

So, how does one tell when cow/calf operators are beginning to rebuild their herd after five years of decline?

A check with some market analysts suggests it’s far easier to see that rebuilding is progressing than to pick a starting point as it’s happening.

Many times, there is pent-up desire to rebuild the herd, but for one or more reasons producers are hampered or unable to do so.  So the “start” can be a series of false starts, further muddying the waters.

 

FIRST THINGS FIRST

 

The first thing is to asses where the herd was at the last count, what are the factors that influenced producers to slash their calf-producing inventory and whether these factors have changed.  And maybe other factors have crept in to block, or limit, herd rebuilding.

The latest cattle herd drawdown was caused by low returns and extended drought.

Heavy losses encouraged cow/calf producers to sell heifers to the feedlots rather than go to the expense of keeping, feeding, breeding and maintaining her health to turn her into a herd cow.

At the same time, extended drought withered pastures and forage production across large swaths of the western, central and southern portions of the contiguous 48 states.  Producers had no choice but to sell heifers and cull cows mercilessly.

 

NOW WHAT?

 

The drought seems to have abated for now, and calf prices are up as feedlot demand remains strong.  This would indicate conditions are right to expect some herd rebuilding.

The USDA has announced it will drop the midyear Cattle (inventory) report for budgetary reasons so the industry is left with the Jan. 1 census and whatever it can glean from other reports.  The midyear report was fraught with problems anyway because producers could change their minds on where heifers would go in the second half of the year.

Probably the first report to watch would be cow slaughter reports.  After a herd drawdown, producers would be more likely to stop culling cows first.

Probably the best report for heifer retention is the Cattle on Feed report.  Each quarter, the USDA parses out the number of steers and the number of heifers on feed.  This is issued with the COF report in the month following the count, so there are reports each April, July, October and January for the previous quarter.

Calculating the number of heifers as a percent of the total can provide a good indicator, albeit delayed, of the relative balance of heifers being sent to feed.

The next best indicator would be weekly receipts from cattle auctions.  Combining the information from several might point to a general direction of the herd rebuild.

 

CATTLE, BEEF RECAP

 

The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $187.32 per cwt to $187.53, compared with last week’s range of $186.66 to $192.34 per cwt.  FOB dressed steers, and heifers went for $298.19 per cwt to $298.58, compared with $293.35 to $302.05.

The USDA choice cutout Monday was up $2.40 per cwt at $315.60 while select was up $1.99 at $303.70.  The choice/select spread widened to $11.90 from $11.50 with 71 loads of fabricated product and 20 loads of trimmings and grinds sold into the spot market.

The weighted average USDA listed wholesale price for fresh 90% lean beef was $356.03 per cwt, and 50% beef was $77.21.

The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.38 to $1.50 a bushel over the Jul corn contract, which settled at $4.43 1/2 a bushel, down $0.02 3/4.

The CME Feeder Cattle Index for the seven days ended Friday was $250.77 per cwt, up $2.53.  This compares with Monday’s Aug contract settlement of $256.20, down $0.20.