Lower beef production ahead

Aug 21, 2009
by WLJ

Lower beef production ahead
Crop conditions over much of the U.S. are quite favorable at this point in the year. The far-western U.S. is turning dry again, as South Texas and the western half of the Gulf Coast slip into extremely dry conditions. Some other areas, mostly scattered through the Central Plains and Upper Midwest, are also abnormally dry. Despite the generally good crop conditions, the cool summer and late start have resulted in crops being well behind normal.

Hay production also appears to be sufficient to replenish stocks in preparation for winter supplemental feeding, and quality is good except for cuttings on which rain has fallen. Cattle in South Texas are being supplemented with hay. The National Agricultural Statistics Service semiannual cattle inventory report released on July 24, 2009, showed the July 1, 2009, total U.S. cattle and calf inventory 1.5 percent lower than the July 1, 2008, inventory, the lowest July 1 inventory in the series since it began.

The total U.S. cow inventory declined by 1.4 percent from the July 1, 2008, inventory, also resulting in the lowest July 1 inventory in the series that began in 1973. Total U.S. replacement heifer inventories declined by 1.2 percent.

Beef cow and beef replacement heifer inventories declined by 1.4 and 2.2 percent. The more rapidly declining beef heifer inventories imply that the national beef cow herd will continue the current liquidation phase of a cattle cycle that began in 2005 (from an inventory that was low in 2004) and peaked in 2007. Consistent with declining beef cow and heifer inventories, the ratio of heifers to total steers and heifers on feed in feedlots of 1,000 head or more is the highest July ratio since July 2004. This ratio and the year-over-year decline in other-heifer inventories make beef heifer retention for cow herd expansion unlikely in the near term. Further, the declining cow and replacement heifer inventories indicate the potential for reduced placements of feeder cattle in feedlots over the next two or more years because of the impact these inventories have on future calf crops.

July 1, 2009, dairy cow inventories declined by 1.6 percent, a reversal of recent milk cow inventory growth and the first decline since July 1, 2004. Milk replacement heifer inventories were unchanged from July 1, 2008, which suggests some level of producer expectations of dairy herd expansion because the July 1, 2009, milk replacement heifer inventory is based on a smaller milk cow herd (9.2 million cows) than the corresponding 2008 inventory (9.35 million cows). That is, the ratio of replacement heifers to the base cow herd in the July 1, 2009, inventories is 0.424 compared with the 2008 ratio of 0.417. However, continued poor returns will likely dampen most expansion plans.

Despite the 1.6 percent decline in the dairy cow inventory, milk production will likely decline by a smaller percentage. This will occur because in the national aggregate, higher producing cows likely were and will be retained (because their profit margins will likely be better), and those cows removed will probably be partially replaced in the aggregate herd by higher producing heifers. Both culling lower producing cows and retaining genetically superior milk producing heifers are consistent with the positive growth trend in milk production.

The general declines in both cow and heifer inventories have implications for beef production over the next several years, possibly into 2012 or beyond. To understand why, it is important to recognize that heifer inventories are divided into two categories, depending on the intended end use of the heifers—as either breeding females or as fed cattle. An increase in one category is at the expense of the other—that is, the fewer heifers kept for breeding, the more are available in the short run to go into feedlots for beef. This decision as to final heifer disposition is alterable to some extent, as it can be made at several points between the birth of the heifer and slaughter as a fed heifer. Generally, the decision is made between weaning and 1 year of age—when most weaned calves, both steers and heifers, spend some time growing on pastures—and before the non-breeding heifers are placed on feed. Again, this decision regarding heifers has implications for longer term feeder cattle supplies and subsequent beef production. As heifers are fed for slaughter rather than retained as breeding females, shortterm beef production increases.

Then, during a future expansionary phase of a cattle cycle, increasing retention of heifers for breeding results in fewer heifers going into feedlots for beef production. This, combined with fewer steers available to be placed in feedlots due to reduced calf crops, results in declining beef production and often in high and volatile prices for fed cattle.

Beef production from steers is affected because about half of each national calf crop is male calves, of which all but about 3 to 5 percent are destined for slaughter as fed cattle.

During the contraction phase of a cattle cycle, more cows are generally sent to slaughter, and heifers are placed in feedlots rather than being retained for breeding. Subsequently, calf crops decline and fewer steers are available to be placed on feed. This downward spiral continues until enough heifers are retained for breeding to increase breeding female inventories. Then a year or two later, calf crops begin increasing and supplies of feeder cattle for placement in feedlots begin to increase, resulting in increasing beef production.

Feeder cattle supplies outside feedlots generally have lagged cycles in cow inventories by a year or two. This lag occurs because feeder cattle supplies consist of virtually every class of live cattle not kept for breeding and not in the feedlot. These cattle represent a wide age range that allows considerable flexibility in the timing of placement in the feedlot or, for some heifers and bull calves, retention as breeding animals. — WLJ