Smallest cattle herd since 1951; smallest cow herd since 1941

Cattle and Beef Markets
Feb 10, 2014

The now-annual Cattle Inventory report was released on the last day of January. The verdict is a slightly bullish, hopeful one. Beef replacement heifers were up, and even if they weren’t up as high as had been hoped, there are several details that inspire optimism for the future. Now things are in Mother Nature’s court.

According to the report, all U.S. cattle as of Jan. 1, 2014, numbered 87.7 million head, down 1.8 percent from the same time in 2013. This is the smallest total cattle herd since 1951’s 82.1 million-head herd.

As expected, the annual cattle inventory report confirmed that the U.S. cattle herd continued to liquidate in 2013,” said Derrell S. Peel, Oklahoma State University Extension Livestock Marketing Specialist. “The numbers indicate that the industry is poised to begin rebuilding in 2014…weather permitting.”

Beef heifers over 500 lbs. held for replacement numbered 5.47 million, up 1.7 percent from the same time last year. This was a slight disappointment from pre-report industry estimates published prior to the report, which had anticipated a heifer retention rate up 3.1 percent compared to Jan. 1, 2013. Despite this shortcoming, Peel pointed out the silver lining.

“The number of beef replacement heifers as a percent of the beef cow herd, at 18.8 percent was the largest in more than 20 years, including the last cyclical expansion in the early 1990s.”

In five of the six top cow/ calf states—Missouri, Nebraska, Oklahoma, South Dakota and Texas—heifer retention was up. Only Montana saw a decline, at 1.2 percent, with 430,000 replacement heifers. Missouri was up 5.2 percent with 305,000 heifers held for beef cow replacement. Nebraska was up a respectable 10.6 percent with 387,000 heifers held back. Oklahoma saw the largest percentile increase with 325,000 heifers kept to replenish the cow herd, up 16.1 percent. South Dakota increased its heifer retention ranks by 4.8 percent with 330,000 heifers, and Texas—which was head and shoulders above the next largest cow/calf state— held back 640,000 heifers, up 6.7 percent from Jan. 1, 2013.

The population of beef cows that have calved fell almost 1 percent on Jan. 1, 2014, compared to the same time last year with 29.04 million. This decline was less than the average prereport industry estimate of a 1.5 percent decline. This is the smallest beef cow herd since 1962. The population of all cows and breeding heifers (beef and dairy) numbered 38.3 million, a 0.6 percent decline, which is the smallest total cow herd since 1941.

Four of the top six beef cow/calf states saw declines, while two—Missouri and Oklahoma—had more beef cows this year than last. Missouri’s cow herd increased 3.6 percent with 1.82 million cows, and Oklahoma’s increased 2.9 percent with 1.81 million cows.

Montana, Nebraska, South Dakota and Texas all had smaller cow herds at the beginning of 2014 compared to 2013. Montana’s cow herd shrank 2 percent at 1.48 million, and Nebraska’s contracted by a half a percentage point to 1.8 million cows. South Dakota’s cow herd declined 3.2 percent to 1.64 million cows, and Texas lost 2.7 percent of its sizable cow herd to see Jan. 1 at 3.91 million cows.

“The January 1 cattle inventories for all cattle, as well as beef cows, can be the lows from which the industry rebuilds over the next several years,” summarized Peel. “However, industry is quite vulnerable to drought conditions that could reintensify this spring and postpone herd expansion once again. Market signals for expansion are strong and growing and the industry is poised to respond. We know what we want to do; we just don’t know what Mother Nature is going to let us do.”

Whether or not 2014 proves to be year three in the string of thwarted herd expansion has yet to be seen. Remember that in both 2013 and 2012 cattle producers began the year with high hopes of beginning expansion, but continuing drought scuttled those plans. The lack of rain and subsequent lack of forage meant heifers retained those years to enter the cow herd wound up in the feeder pool.

“What cowmen want to do and what Mother Nature allows them to do are frequently two very different things!” reminded Steve Meyer and Len Steiner of the CME Daily Livestock Report. “With that caveat clear, conditions do appear to be better this year and the economic situation is very positive. A large portion of these heifers will likely find their way into cow herds this year.”

In many parts of the country, drought conditions have decreased and declined in intensity. According to the most recent Drought Monitor, roughly half of the U.S. (or 43 percent of the contiguous U.S.) is free of any kind of drought. The same time last year saw less than a third (31 percent for total U.S. and 30 percent for contiguous U.S.) of the country able to make that claim. Additionally, this same time last year saw 6 percent of the U.S. in the highest level of drought, whereas this year that number has fallen to 0.83 percent.

“While herd rebuilding may be in its beginning stages in the beef sector, it will be a slow process given the historically small number that the herd will be rebuilding from,” noted John D. Anderson, Deputy Chief Economist of the American Farm Bureau Federation.

“In addition, very strong feeder cattle prices are making it quite costly for producers who want to expand to hold replacement heifers.”

The pipeline supplies of cattle to become beef in the near future are of course very tight. That isn’t news at this point. But the extent of the shortages of cattle was highlighted and lent solid numbers by the Inventory report.

Inventories of cattle on feed as of Jan. 1 was down 5 percent from the same time last year, and the population of cattle and calves outside of feedlots—the summation of “other heifers,” steers and bulls over 500 pounds, and all calves under 500 pounds less the on-feed population—is additionally down.

“The calculated inventory of calves outside of feedlots is just 26.8 million head, down 2.6 percent from a year ago,” equated Anderson. “In historical context, this begins to look like a really small number. For example, note that in 1995 when the on-feed inventory was 12.4 million head, the inventory of calves outside of feedlots was just over 35 million—almost 25 percent larger than today’s. This, of course, has serious implications for feedlots, packers, other downstream firms, and input providers who must compete for their share of this business.”

The measure of those above-mentioned parts of “calves outside of feedlots” is as follows:

“Other heifers” over 500 lbs. numbered 8.74 million, down 5 percent from 2013 Steers over 500 lbs. numbered 15.41 million, down 3 percent Bulls over 500 lbs. numbered 2.03 million, down 1 percent All calves under 500 lbs. numbered 13.28 million, down 4 percent Cattle on feed numbered 12.70 million, down 5 percent To add longevity to the short supplies now, the Inventory report also showed that the 2013 total calf crop was 33.9 million head. In addition to being down 1 percent from 2012, this is the smallest calf crop seen since 1949. This plus heifer retention—if successful— will help continue the restricted supplies of cattle becoming beef into next year and beyond. — Kerry Halladay, WLJ Editor