January 30, 2012 Cattle Numbers Below Expectations
Friday’s Cattle report from USDA indicates that the number of cattle on U.S. farms and ranches on January 1 was less than
expected by analysts.
- There were 90.769 million cattle and calves on U.S. farms as of January 1. That number is 2.1% lower than on year ago and 0.5% lower than the average of analysts’ pre-report expectations- a relationship that is mildly bullish for cattle prices this year and next.
- The beef cow herd on January 1, 2012 is sharply lower than one year earlier. That is no surprise but the 3.1% decline is larger than was expected, since analyst’s average estimate was –2.6%. The decline of 3.1% is the largest since 1986 when the herd declined 4.7% — on the heals of a 5.5% decline in 1985. Those were the years of painful adjustments to declining beef demand.
- This year’s decline is the sixth in a row and twelfth in the past fourteen years. Since that string began in 1996, the U.S. beef cow herd has declined by 15.4%. It should be noted, though, that commercial cattle slaughter has declined only 6.8% from 1996 to 2011 and commercial beef production has GROWN by 3.1%. The relatively smaller decline in slaughter is due to higher calving percentages, higher calf survival rates and faster growing cattle that enable higher output from a given sized herd. The smaller decline in beef output was driven by those factors plus a significant increase in slaughter weights, enabled by better genetics, nutrition and growth promotants.
- The beef cow herd decline of 967,000 head was driven almost entirely by the reduction of the nation’s two largest state beef cow herds in Texas and Oklahoma. The Texas herd declined by 660,000 head (13%) to 4.365 million as of January 1. Oklahoma’s herd fell by 288,000 head (14%) during the year. Nebraska was the benefactor of some of those Texas and Oklahoma reductions as cows were moved northward to relatively ample grass supplies. Nebraska’s beef cow herd was 6% larger on Jan 1.
- One surprising number relatively to the pre-report survey data was that of heifers being held as beef replacements. That number at 5.212 million head was 1.4% HIGHER than last year where ALL analysts expected the number to be lower. Many were surprised by those expectations in the first place as we have heard since last summer that some significant heifer retention has commenced in northern and southeastern states. Nebraska’s beef heifer numbers are up 55,000 head (18%) from January 1, 2011.
- The 2011 calf crop is now estimated at 35.313 million head, 1.8% smaller than last year and the smallest crop dating back to 1951, the oldest data we could get our hands on. The crop is also 0.8% smaller than was expected by analysts — a bullish factor for 2013.
- The supply of feeder cattle outside of feedlots on Jan 1, as computed by the Livestock Marketing Information Center, was 3.9% lower at 25.845 million head. There is a reason that feeder cattle prices are record high!
- Finally, the number of cattle on feed in ALL feedlots was up 0.8% on January 1. That compares to +3% for lots that hold 1000 head or more. Small lots have reduced their inventories from 2.499 mil. head to 2.270 mil. head (9.2%) as feeder cattle prices have soared.