Consistently lower estimated and real cow/calf returns this year may lower heifer retention for breeding but could play only a minor role in total herd growth as of Jan. 1, as reported by the USDA.
The Livestock Marketing Information Center has consistently ratcheted down estimated cow-calf returns this year. Fourth-quarter calf prices were estimated to be about 25% below a year ago, down from an estimate made early in the third quarter of a 15% decline.
Calculated returns do not include all economic costs of production, since every operation has different resources and costs, and the LMIC feels year-over-year changes in calculated returns are more insightful than the specific numeric levels.
As of late September, the LMIC’s 2016 estimate was a return over cash costs plus pasture rent of $14.97 a cow, the lowest since 2009’s minus $34.68 and worlds apart from the 2014 record performance of $530.22.
Estimated returns also show a decline of $288.11, or 95.1%, from 2015’s $303.08.
Returns this year will not cover the total economic costs for most cow-calf operations, the LMIC said. While estimated costs of production have decreased slightly in 2016, based on cheaper fuel, feed and slight drops in pasture cost, they have not been enough to offset declining calf prices.
Huge returns from 2013 through 2015 provided the economic foundation to grow the US beef cow herd. But while the economic stage has changed dramatically, but the adjustment in cattle numbers is just starting.
A LOOK AHEAD TO JAN. 1 CATTLE NUMBERS
The LMIC estimated 2016’s female cattle slaughter will represent 43.5% to 44% of total cattle slaughter for the year.
Based on historical relationships back to 1950, a female cattle slaughter ratio this low has never resulted in a decreased total cattle inventory in the corresponding Jan. 1 report. It is not until female slaughter to total slaughter gets to about a 48% ratio or greater that a decrease in cattle inventory is likely.
Looking ahead to Jan. 1, female slaughter this year does not suggest anything much different than the 3.5% annual increase in total cattle inventory that was posted as of January 2016.
However, some other factors, including the year-on-year drop in US feeder cattle imports from Canada and Mexico, have led the LMIC to suggest herd growth may moderate and could be in the 2.5% and 3.5% range. It will be important to note in what categories the herd growth occurs.
We expect growth in “other heifers” (those meant for a feedlot) as opposed to growth in replacement heifers. It is clear from slaughter data trends that the summer of 2016 was the first step in the transition to lower national herd growth rates. As 2017 unfolds, the year-over-year increase in female slaughter is projected to continue causing a more notable slowdown in cow herd growth by Jan. 1, 2018.
CASH CATTLE MARKETS QUIET
Cash cattle markets Tuesday were quiet with no bids or offers reported as futures rose. Cattle last week were $2 to $3 per cwt lower at $103 to mostly $104 on a live basis and at $162 to mostly $163 dressed.
The USDA’s choice cutout Tuesday was $0.28 per cwt lower at $186.34, while select was up $0.49 at $177.48. The choice/select spread narrowed to $8.86 from $9.63 with 84 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $131.31 per cwt, down $1.00. This compares with the Oct settlement Tuesday of $128.00, up $4.02.