It always takes longer than you think; we are “out of cattle”

 Resize text         Printer-friendly version of this article Printer-friendly version of this article

Exactly two years ago I wrote an article about the implications of declining cattle numbers (“At What Point Do We Run Out of Cattle”, Cow Calf Corner, November 15, 2010) .  In that article I suggested that after many years of herd liquidation, we had reached a point where it was not possible to maintain beef production without herd rebuilding.  The article suggested that beef production would drop without herd rebuilding and that herd rebuilding would squeeze cattle supplies even more in the short run.  The article further suggested that the only possible postponement to those consequences would be the temporary one if more herd liquidation occurred. 

Little did I know that November of 2010 was the beginning of the driest and warmest year in Oklahoma and the Southern Plains.  The resulting cow liquidation and preempted herd rebuilding that occurred in 2011 and 2012 bring us to this point where the impacts I anticipated many months ago are now upon us.  Feedlot placements have dropped sharply the last four months and feedlot inventories are declining and will continue to decline in the coming months.   In my mind the bigger question is not why we have such a dramatic decrease in feeder cattle supplies now but why it has taken so long for the situation to manifest itself.  I believe there are several reasons.

The biggest and most obvious one is two years of drought which provoked additional liquidation, and postponed heifer retention thereby moderating declining overall cattle numbers.  It seems to me that drought and high cattle prices the last two years have had the effect of bringing cattle “out of the bushes” in a way that we have not seen for many years and may not be fully reflected in the cattle inventory data.  Another factor is veal calf slaughter, which is a minor part of the total, but responds as you would expect in these conditions.  Veal slaughter decreased about 11 percent from 2008 to 2011 and is on pace to decrease another 11 percent in 2012.  Compared to 2010, the decrease in veal slaughter the past two years has added roughly 120,000 head to feeder supplies.  Finally, feeder cattle imports from Mexico and Canada have augmented declining U.S. feeder supplies since 2009.  In the last two years, increased feeder cattle imports have boosted feeder supplies by roughly an additional 300,000 head.  In the first half of 2012, Mexican imports were continuing that trend with a record pace of drought forced sales of cattle. 

As we move into 2013, some things about cattle supplies are more clear and some are still uncertain.  What’s clear is that two more years of liquidation have put the industry in an even deeper hole with respect to feeder supplies.  The 2013 U.S. calf crop will be the smallest since 1942, based on my estimates.  What is also clear is that feeder cattle imports will drop dramatically.  Mexican cattle imports have decreased sharply in late 2012 and may decrease feeder supplies in 2013 by 600 to 800 thousand head year over year compared to 2012.  What is unclear is the drought question.  Continued drought will moderate the short run effect by provoking more liquidation and postponing heifer retention.  If drought conditions improve, herd inventories will stabilize and some heifer retention may begin in 2013. 

Feedlots have not only placed fewer cattle but recent placements have been heavier weight and will move through feedlots faster.  It will be increasingly difficult to find placements to follow current feedlot inventories.  A significant decrease in cattle slaughter and beef production is unavoidable in 2013 and 2014.  Continued drought may continue to impact the timing somewhat, but any short run moderation of tighter supplies due to drought liquidation will be at the expense of more drastic impacts later; just as the situation now is more drastic than it was two years ago. 



Comments (3) Leave a comment 

Name
e-Mail (required)
Location

Comment:

characters left

Ricardo Cauduro    
Brazil  |  November, 21, 2012 at 06:31 AM

Derrel Peel That is the same what have occurring in my state (Paraná) in Brazil. But the cause is not the drought, our cattle liquidation is because the increase areas of agriculture ( soybean, corn and sugarcane). If we do not start now to rebuild our cattle heard, in a short time, there will be no cows to supply steers to the slaughter industry. Regards. Ricardo Cauduro Veterinarian

Ray Rodriguez    
Arizona  |  November, 23, 2012 at 09:50 PM

Your State is in a very good area for agriculture, the cow-calf industry will have to migrate to the marginal lands where row cropping is not feasible. Brasil has many areas which are better suited for grazing, just like we have in the Western USA and Northern Mexico. Those areas will produce the raw building block, the feeder calf, then they can be moved to better areas for intensive grazing and feeding. The new pioneers are developing those cowherds right now to utilize those marginal areas, and it takes a different beast than the ones we have selected for the last 60 years in the US. It is an exciting time to be in the beef genetics business. Good luck!!

rick    
November, 24, 2012 at 05:13 AM

In your article on timing of herd liquidation and rebuilding you have not mentioned that the long term trend was toward continual national herd reduction nor did you mention packer concentration and its effect on price signal suppression. Until very recently the packers have managed to suppress the price signal necessary to trigger herd rebuilding, even herd retention. This was the first year in my memory (30+years) where the out of state calf buyers paid anywhere near Midwestern price. For years this area served to cost average the price of calves for western feedlots. Yet despite this I know of several 50-80 herds and numerous 10, 20 & 50 cow herds being liquidated to the slaughter house. Why, because the cull price allows these mostly older producers to exit and recover some of their investment. Furthermore, they can at the very least rent this land to soybean farmers for more than they could ever make raising calves for a whole lot less work. How long this will last I don’t know but even at half the price soybeans are a better crop than beef calves. Meanwhile I have not yet heard of one packer indicate that the beef supply is too short. In fact the reduced supply may be even more advantageous for the packers since it puts them in a much better market position vis a vis the even more consolidated supermarket companies. It is quite possible that the current drought only served to accelerate the long-term trend and that herd retention may still be some ways off.


Inforce®3

As you gear up for branding or turnout this spring, remember to help protect your herd from respiratory disease. Give ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Leads to Insight