Cattle numbers may be declining, but lower supplies are not translating into a rally for prices. That’s because beef demand is significantly softer this year, for both domestic use and exports.

USDA’s semi-annual Cattle Inventory report showed a decline of 1.5 million head, totaling 101.8 million head. It was the third consecutive year of decline, and the lowest mid-year total in 37 years.

Despite declining beef cow slaughter during 2009, the mid-year inventory of beef cows was 450,000 head smaller, totaling 32.2 million head. Compared with a decade ago, the nation’s beef cow herd is now more than 2 million head smaller.

Declines in the cow herd are attributed to dry weather over much of the plains states the past year, significantly higher feed and fuels costs, and a recession that has softened demand for beef and caused significant losses for cattle feeders.

Beef production is also showing the effects of softer demand as last week’s USDA report showed production was the lowest in 14 weeks. So far in 2009, 18.54 million cattle have been harvested, which is 5.2 percent lower than at the same time last year. That calculates into total beef production of 14.4 billion pounds, a decline of 4.2 percent from a year ago.

 

Feedyards have lost money on most cattle marketed this year, giving them little encouragement to buy replacements. And packers are losing in excess of $60 per head on every animal slaughtered, which provides little hope bids will improve significantly any time soon.

 

Cash bids for fed cattle are also hampered by declining beef exports. Last week exports totaled 8.4 metric tons, a 3.65 percent decline from the previous week. So far this year exports have totaled 292.5 metric tons, a decline of 15.68 percent from 2008.