Cattle markets are in relatively good standing, even after large 2016 herd growth that showed up as a large January inventory, weather concerns of snow, drought and wildfire, and a volatile trade issues. As USDA prepares the mid-year inventory report, Drovers asked Derrell Peel, Oklahoma State University economist, what he expects to see:
1. Expansion likely to continue
“We’ve had a remarkable year in the overall market and everyone’s moods have improved. I’m still expecting to see some herd expansion in 2017, but not as much as last year,” Peel says. “I’m tracking cow slaughter, beef cow slaughter and heifer slaughter numbers. We started this year with a very large inventory of replacement heifers, including a large inventory of heifers intending to calve. Right now, my best estimate is 1.5% to 2% overall cow herd expansion.”
2. State/regional issues (drought, wildfires) will cause some disruption but will not affect overall herd populations.
While large weather events might impact a specific region, they are rarely big enough to have an overall market impact. “In 2011 and 2012 when we had such widespread drought in the Southern Plains, we lost a million head in one year in Texas, Oklahoma and surrounding states. That obviously has an impact and can change the path of the industry—and it did.”
“But as bad as they were, the wildfires this spring and the drought now in the Northern Plains are not likely to change the overall inventory that much,” he says. “It will have marginal impact in those regions, but I don’t think it will change the course of things much.” Read more about the wildfire recovery effort.
Peel says producers haven’t cut too deeply into the core cow herd. “It might be that we’ll see changes in the number of young replacement heifers being bred, but again I think that will be a regional situation,” he says.
3. Calf crop will be bigger.
“One of the things about the July report is we like to get an early idea of what the 2017 calf crop will be,” Peel says. “We expect it will be bigger, obviously, with the big increase in the herd we had last year.”
The July report will not have state breakdowns, but the overall calf crop number will identify the volume of supplies for this fall marketing season.
“We know there are more cattle in the pipeline, our supplies are going to continue to grow through the rest of this year and next year. Overall beef production will be higher, but we are managing that pretty well from the standpoint of weights are doing to offset higher slaughter numbers. And, we’re seeing demand pickup to more than offset available supplies, which is why we had stronger than expected prices so far this year.”
“2017 has been a surprising year—from the lows of last fall, we expect some market recovery but its been better than expected,” Peel says. “Its demand driven—both domestic and international. Pretty much everybody in the industry is making money right now and that doesn’t happen all that often.”
That said, market seasonality is still there. “We probably have seen the peak of this trend—it took longer to get here than anyone expected,” Peel says. “But we’re starting from that higher seasonal high than we expected, so it’s still not a bad thing.”
The mid-year report will be released this Friday, July 21.
Want to help out with the efforts to rebuild fencing destroyed by the wildfires? You only have a few more weeks to donate to the Droves/Farm Journal Foundation Million Dollar Wildfire Relief Challenge. Every dollar donated is matched by the Howard G. Buffett Foundation, up to a million dollars. To learn more, visit www.wildfirerelieffund.org.