For the second time in a decade, drought has pushed US cattle numbers lower than planned and lower than needed to meet the demands of the market, said Derrell Peel, Oklahoma State University livestock marketing specialist, in a letter called Cow-Calf Corner.
CATTLE PRICES TRENDING HIGHER
Cattle prices are trending higher, much as they did in 2013 prior to the herd rebuilding that commenced in 2014, Peel said. However, while drought has diminished in much of the country, important beef cattle regions in the Central and Southern Plains are still in drought, limiting how the industry is able to respond.
Beef cow slaughter is falling this year, usually the first sign of ending liquidation and stabilizing the cow herd, he said. However, with the year more than one-third over, cow slaughter is down only about 11% from last year–not enough to ensure the end of herd liquidation.
In 2014, beef cow slaughter dropped just over 18% from the previous year, putting the brakes on liquidation, Peel said. He thought the ongoing drought was masking continued liquidation in some areas.
While signs are encouraging that the drought will continue to fade through the year, more beef cow herd liquidation is likely in 2023, he said.
BRED HEIFER SUPPLY STILL LOW
The supply of bred heifers on Jan. 1 was down 5.1% year over year to the lowest since 2011, Peel said. This low inventory, combined with the relatively slow reduction in beef cow slaughter, makes additional beef cow herd liquidation this year probably unavoidable.
In other words, if drought conditions continue to improve, 2024 probably will be the low point of the herd similar to 2014, albeit at even lower inventories.
The peak in 2014 cattle prices, extending into 2015, precipitated record heifer retention in 2015 and 2016 that pushed the beef cow herd higher, he said.
REPLACEMENT HEIFERS VERY LOW
The supply of replacement heifer calves (available to be bred this year) on Jan. 1 was very low, suggesting the ability to add heifers next year may be limited, Peel said. However, some heifers not reported as replacements typically get bred, and the number may increase.
Nevertheless, the overall supply of heifers remains limited, he said. Feedlot heifer inventories remain high, though they are declining.
Heifer slaughter in 2023 is fractionally higher on top of the large heifer slaughter last year, Peel said. Heifer slaughter in 2022 was 30.6% of total cattle slaughter, the highest proportion since 2005.
He expected heifer slaughter to decrease through the year but, like beef cow slaughter, at a relatively slow rate.
Heifer retention likely will begin in earnest this fall with heifer to be bred in 2024, he said. Modest herd expansion is possible next year with faster herd expansion thereafter.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $171.68 per cwt to $183.03, compared with last week’s range of $169.74 to $183.99 per cwt. FOB dressed steers, and heifers went for $267.34 per cwt to $275.12, compared with $268.57 to $278.21.
The USDA choice cutout Thursday was up $0.60 per cwt at $306.44 while select was down $0.83 at $286.32. The choice/select spread widened to $20.12 from $18.69 with 110 loads of fabricated product and 23 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 $1.68 to $1.78 a bushel over the Jul corn contract, which settled at $5.92 1/2 a bushel, down $0.01 1/2.
The CME Feeder Cattle Index for the seven days ended Wednesday was $208.07 per cwt, up $0.89. This compares with Thursday’s Aug contract settlement of $241.65 per cwt, up $2.47.