Declines in the US beef cow herd and lower cattle inventories point to continued reduction in US cattle availability and higher prices in the next 18 months, according to US analysts, Steiner Consulting.

The latest US Department of Agriculture semi-annual Cattle Inventory report suggests the total inventory of US cattle and calves as of July 1 was 1.3 million head or 1.3pc below this time last year, reaching a figure of 100.9 million head.

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Inventory numbers last year were affected by the backlog created due to the outbreak of COVID and impact this had on US packing plants. The situation this year is very different, Steiner suggests, and inventory levels are now back to normal trend.

The reduction in US beef herd inventory numbers reflects the decline in the US calf crop the last two years, Steiner suggests.

The calf crop in 2019 declined by 721,000 head and last year was down another 456,000 head. The cumulative effect of these reductions has impacted most categories in the USDA half-year report. The heifer inventory on July 1 was down 200,000 head; steers were down 200,000 head and the inventory of calves less than 230kg was down 400,000 head.

“Poor producer returns and drought have resulted in a significant decline in the beef cow herd,” Steiner said.

The report noted that on July 1 the total inventory of beef cows was 31.4 million, 650,000 head or 2pc smaller than a year ago.

“This is a bigger decline than many were expecting but it reflects the accelerating pace of liquidation (due to drought) in the last six months, Steiner said.

Producers also noted that they expected to retain 100,000 fewer heifers for beef cow herd replacement this year. Combined with ongoing high beef cow slaughter, this set the stage for an even smaller US beef cow herd in 2022, Steiner said.

Some of the decline in the beef cow herd was offset by an increase in the dairy herd, which was estimated at 9.5 million head, 150,000 head or 1.6pc higher than last year.

Despite the decline in the beef cow herd, USDA is estimating the calf crop for all of 2021 at 35.1 million head, just 0.1pc smaller than a year ago.

“While this appears somewhat surprising, it is important to look at the calf crop in relation to the cow herd, long term,” Steiner said.

The ratio of the calf crop to the cow herd last year was especially low, at 84.87pc, compared to 85.56pc the previous year and 86.87pc two years prior.

“This year the ratio is back to more normal levels,” Steiner said. “The decline in cattle inventories implies fewer cattle outside of feedlots (feeder cattle supply). We calculate that on July 1 the US feeder cattle supply was 36.1 million head, 600,000 head or 1.6pc less than a year ago.”

The lower feeder cattle supply would continue to limit US feedlot placements in the next few months and slowly bring feedlot inventories below 2019 levels.

The supply of cattle on feed (all US feedlots) was estimated at 13.4 million head, down 1.5pc in July compared to a year ago.

Drought major concern across western parts of US

As the map above illustrates, drought conditions remain a major concern across western regions of the US. June US slaughter data released last week showed that despite an improvement in moisture conditions, large increases in cow slaughter were seen in worst affected regions. Some regions were as much as 27pc higher than the same period in 2019 for cow slaughter (last year’s data was distorted by COVID impact on processing).

US beef cow slaughter in April and May was up double digits versus the same period last year, and tracking close to the 2011 drought year that saw significant beef cow liquidation. That trend continued through June.

The effect of drought in California, Nevada and Arizona saw beef cow slaughter in those regions up 52pc in the second quarter ending June 30, compared with the same period in 2019.

It could very well be that if drought conditions worsen, at some point producers may throw in the towel, resulting in higher beef cow slaughter in the third quarter, ending September 30,” Steiner said.