The US Department of Agriculture’s half-yearly US cattle inventory survey due for release soon is expected to show further declines in breeding cow and overall herd numbers, analysts were anticipating on Friday.

US cattle prices may have hit all-time record highs earlier this year, driven partly by export income, but that had not proven to be enough to stop the ongoing liquidation of the US beef cow herd, Chicago Mercantile Exchange’s Len Steiner said on Thursday.

High feed costs and extreme drought conditions in Texas and surrounding states which account for 40 percent of the US beef cow herd had forced producers to continue to market more females.

Analysts expect the latest USDA figures to show total US cattle inventory on July 1 to be 1.4pc lower than this time last year. If that proves correct, the herd size of 99.685 million head would be the first time since the report was established almost 30 years ago that total US cattle stocks had dropped below 100 million head.

The US beef inventory figures have been in general decline since the 1970s, in part reflecting the steady erosion in US beef demand as chicken and other proteins gained prominence, but also reflecting productivity gains in the industry.

The rise of feedlot operations has allowed US producers to turn over cattle faster and significantly increase the amount of beef produced from cattle placed in feedlots.

The July 1 cattle inventory figure in 1973 (the first year the survey was conducted) was 131.5m head, while total US beef production that year was 21.1 billion pounds. In 2011, the total inventory will be almost 32 million head less, but production is expected to hit 26.2 billion pounds. During the same time the US population has increased by 100 million, and the global population from 4 billion to almost 7 billion.

“Increasing global incomes, lower trade barriers and more fluid markets has led to ever-rising beef demand globally. All of this will put more pressure on US beef prices long-term and cattle prices will rise to points that, once again, make it profitable to invest in this business,” Len Steiner said in his recent Daily Livestock Report.

“For the moment, however, US beef producers appear to be in no position to expand,” he said.
Analysts expect the July USDA survey to show very low heifer retention for beef cow herd rebuilding. Beef cow replacement numbers are expected to be down 3.3pc from last year, to a meagre 4.255m head. The beef cow herd itself is expected to be down 1.9pc to 31.2m head.

“Lack of herd rebuilding and the ever-shrinking cow herd will lead to fewer calves coming to market, not just in 2011, but likely in 2012 and 2013,” Mr Steiner said.

Consistent with lower cow inventories, analysts expect the upcoming report to show another 1.5pc drop in the calf crop to just 35.149m head, or half a million less than last year, and the lowest since 1950.

“With two million fewer calves coming through than just five years ago, US beef supplies will remain tight and pave the way to even higher beef prices down the road. US cattle prices appear high at this time but they will be even higher when producers finally decide to hold back heifers for herd rebuilding,” Mr Steiner said.

Severe drought and record high temperatures across southern states was reflected in a USDA report issued last week noting that 32pc of US pastures were now in poor/very poor condition, three times as bad as a year ago when just 11pc of pastures were rated that way.

The poor/very poor rating for Texas now stands at 94pc, and was almost as bad in other major beef states like Oklahoma (78pc) and New Mexico (90pc).

Lack of pastures has been pushing more cattle onto feedlots recently and analysts expect the latest data to show a significant jump in the number of light and very light calves placed into US feedlots. This would tend to accelerate livestock growth and had the potential to create significant gaps in marketings early next year.

With corn prices hovering at $7/bushel, such light placements were expensive and far from the optimal feeding regimen for feedlot cattle. The result could be lighter and lower graded cattle coming to market over the next six to nine months.

With more breeding females hitting the market now, cow meat supplies and grinding materials might not be as readily available in October and November, which could spell opportunity for Australia.

Reshaping US cattle herd in geography and size

Writing in Friday’s US Cattle Buyers Weekly, publisher Steve Kay said the extreme drought from the Southwest to the Southeast of the US was reshaping the nation’s cattle herd in terms of geography and size.

He said while numbers from USDA for total cattle and calf numbers on July 1 were expected to be down more than 1pc from a year earlier, and breeding cow numbers down 2pc, more significant was the beef cow replacement numbers, likely down 5-6pc.

“These heifers, instead of being retained for herd rebuilding, have gone to feedlots for finishing and then to slaughter. These declines, plus the expected 1.5pc decline in the calf crop, means the US herd might decline this year by as much as 1.5m head. This would make the herd the smallest since 1958,” Mr Kay wrote.

Jim Robb, Livestock Marketing Information Centre, told CBW that the decline in beef heifer numbers was extremely important as it meant the US industry continued to ‘shrink its nursery.’

Cow/calf producers outside the nation’s drought zones had an economic incentive to expand their herds but they, too, were still being very cautious. Depending on how much longer the drought persisted and if cow slaughter continued to run at high levels, the overall US herd might decline 1.5pc this year, Mr Robb said.

Faced with lack of grazing, dwindling hay supplies and shrinking surface water resources, Texas producers continued to cull deeper into herds, the Texas AgriLife Extension Service told CBW.

“They are culling a lot deeper and a lot harder than they normally would,” a TAES agent said. “They’re culling into the heart of their herds – heifers and three to six year old cows that should form the core of future production. It will take years to rebuild those herds.”