July 1 beef cow inventories have been declining since reaching a cyclical peak of 36.1 million cows on July 1, 1995. Since July 1995, there have only been 2 years in which beef-cow inventories increased (143,000 head from 2004 to 2005 and 28,000 head from 2005 to 2006) from prior-year inventories.

On July 1, 2011, beef cow inventories were down another 1 percent year-over-year. Beef replacement heifer inventories were down by 5 percent. The lower year-over-year beef cow inventory and the 5-percent
decline in beef replacement heifer inventories imply very little potential for beef cow herd expansion before 2014.

Once it is decided to retain a heifer for breeding, she must be allowed to grow to a sufficient size for breeding. After she is bred, gestation requires another 9 months before she can calve. Only after a heifer has a calf is she added to either the January 1 or July 1 beef cow inventory, depending on whether she was bred to calve when she would be about 24 months of age. In addition to a long biological cycle, much of what occurs in cow-calf production is highly seasonal.

While dairy cow inventories have been trending lower during the same 1995-to-present period, they have been more variable as they responded to fluctuations in milk prices and Cooperatives Working Together whole-herd buyouts. July 1, 2011 milk cow inventories were about 1 percent above 2010.

Calf crops have also declined steadily since 1995, and the 2011 calf crop is now projected to be 1 percent below 2010’s calf crop. Although there are exceptions, and because most steers and heifers are placed on feed at about 12 to 15 months of age, one year’s calf crop translates roughly into the next year’s placements of steers and heifers on feed. Thus, 2011’s lower calf crop implies a reduction of placements of feeder calves in 2012.

As feedlot inventories decline and beef cow slaughter diminishes, beef production will likely begin to decline during the last half of 2011. The impacts of smaller calf crops this year and likely next year imply a smaller pool of feeder cattle for placement in feedlots and subsequently tighter supplies of fed cattle. Cattle prices at all levels reached record highs during the first half of 2011. Despite these record prices and their expected high levels through 2012, drought impacts, high feed and energy prices, macroeconomic uncertainty, and increased equity requirements for cattle loans have dampened enthusiasm for cow-herd expansion.

Source: Aug. 17 Livestock, Dairy and Poultry report