On Feb. 1, USDA released the much-anticipated January Cattle Inventory Report. The report itself was construed as moderately bullish for cattle prices in late-2013 and 2014. Most final estimates were within the range of pre-report expectations, with one surprising – and arguably most impactful – exception: the annual calf crop total was down nearly 3%, generally suggesting future cattle supplies may be even tighter than previously believed.

All cattle and calves in the U.S. as of Jan. 1, 2013 totaled 89.30 million, which is a 1.6% decrease from Jan. 1, 2012. This was the lowest Jan. 1 inventory of all cattle and calves since the 88.10 million in 1952. Here in Iowa, all cattle and calves totaled 3.85 million, a 1.3% decrease from last year. For the U.S., the number of beef cows and heifers that have calved was 2.9% lower than a year ago; while in Iowa the number of beef cows and heifers that have calved increased 3.4% year-over-year.

Cattlemen have been adding youth to their breeding stock as evidenced in higher replacement heifer numbers. Heifers for beef cow replacement increased 1.9% and 7.1% year-over-year in the U.S. and Iowa, respectively. While heifer replacements were higher than estimates for 2011 and 2012, they remain lower than any other year since 1990 suggesting “real expansion” has yet to be initiated.

The past three years of year-over-year increases in heifers for beef cow replacement indicate more than anything else, the contrast between what the industry would like to do and what it is able to do.

Drought and continued beef cow liquidation meant that a very low percentage of potential replacement heifers actually entered the herd in 2012. Determining what percentage of those heifers may actually enter the herd in 2013 depends almost entirely on whether drought conditions moderate.

It’s also important to keep in mind that quality bred beef heifers are selling in an extraordinarily high price range, and it likely will take some time to recoup even if cattle prices remain strong for the next several years.

The combined inventory of 500+ pound steers, 500+ pound other heifers, and calves was down 1.5% and 2.0% year-over-year in the U.S. and Iowa, respectively. After accounting for cattle already in feedlots, the supply of feeder cattle outside feedlots was 0.7% higher than a year ago in the U.S. However, this slight increase in feeder cattle supplies is not a result of more supplies than anticipated, but rather USDA’s downward revision in the 2012 estimates of steers and other heifers.

Overall, with a smaller forecasted 2013 calf crop and reduced cattle imports, the squeeze on feeder supplies will continue. Without continued reductions in feedlot inventories, the feeder supply will continue to shrink. And, if conditions permit, increased heifer retention will further squeeze feeder supplies in the coming years. You can read the full reports at (U.S.) http://usda01.library.cornell.edu/usda/current/Catt/Catt-02-01-2013.pdf.

Source: Lee Schulz, ISU Extension livestock economist