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A Smaller than Expected Cattle Herd

The USDA Cattle on Feed numbers were release Friday of last week and Jason Franken from Western Illinois University has delved into them.

He calls it a somewhat smaller than expected cattle herd. Saying that the U.S. cattle herd appears to continue its second consecutive year of decline within its typically decade-long period of expansion and contraction.

Currently, there are about 5.5 percent more beef cows in the U.S. than during the last low point in 2014. The first signs that the beef herd was leveling off came about a year and a half ago, he says, and recent reports indicate a continuation of that trend, reflecting economics and drought in parts of cattle country.

“The USDA’s Cattle Inventory report has the total number of cattle and calves on July 1 at 101 million head or 1.3 percent under last July’s inventory of 102 million head, compared to the average pre-report estimate of 0.5 percent lower, and also below the anticipated range. The number of calves under 500 pounds, at 27.4 million head, is also down 1.4 percent. That’s still two million more than when the cattle herd was around its last low point in July 2014, so a return to similar feeder cattle prices in excess of $2 per pound seems unlikely at this time.” 

There is also evidence that the breeding herd is leveling off or at least not expanding overall says Jason Franken. And, given the inventory and cattle-on-feed numbers, he says beef production is anticipated to be no more than one percent higher in 2021 than last year and then drop 1.4 percent next year.

“Taking all of this into account, slaughter steer prices are forecast to average, respectively, about $117.73/cwt and $121.93/cwt for the last two quarters of 2021, and $129.07/cwt and $132.27/cwt for the first two quarters of 2022.” 

A number of factors could yield notably different prices, including the extent to which drought continues to spur further liquidation of the cattle herd and resulting in subsequently higher prices and the possibility that another strain of the coronavirus arises, thereby constraining demand and lowering prices.