Cow liquidation at rates not seen since mid-1980s

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Annual 2012 commercial cow slaughter is expected to be below slaughter in 2011. This level of slaughter would represent 16.8 percent of the January 1, 2012 total cow inventory and is near the 17.1 percent for 2011, both of which exceed the 16.2 percent for 2010—and, more significantly, the 16.3 percent for 1996, when a summer drought and a spike in corn prices set off an extended period of cow-herd liquidation. Prior to the 1996 liquidation rate, the highest rates of cow slaughter since 1980 occurred in 1984 (17.8 percent of January 1 cow inventory) and 1986 (17.7 percent). For most of 2012, dairy cows accounted for a larger proportion of slaughter, although drought throughout the year also motivated a steady stream of beef cows going to slaughter. Unlike the last several years when beef cows represented unusually large shares, dairy cow slaughter during at least the last part of 2012 was atypically high, largely due to the effects of high feed costs and other factors on profit margins.

One possible offset to the effects of high levels of commercial cow slaughter on the breeding herd is the potential for heifers to be retained to replace the cows going to slaughter. Heifers, being generally smaller and less expensive to feed than cows, and ideally having better genetics than the cows they replace, should produce bigger, better calves (although there can be some offsets related to heifer calving and rebreeding). The heifer share of total commercial steer and heifer slaughter has declined from 37.1 percent through November 2011 to about 36.4 percent through November 2012. On an annual basis from 2007 through 2011, the share had been running between 37 percent (2011) and 37.7 percent (2007). Lower shares imply more heifers are being retained for cow-herd replacements. The National Agricultural Statistics Service Cattle report to be released on February 1 will provide information about heifer retention, along with changes in cow inventories.

The prevalence of drought-reduced pastures over most of the central United States was thought to be a key factor affecting retention of feeder cattle for growth to heavier weights. Consistent with this logic, placements of the lightest (under 600 pounds) feeder cattle in feedlots in 2011 and recently in 2012 have been above historical levels.

Although consistent with the dogma of placing heavy cattle when feed prices are high—as has been the case for 2012 and will likely continue to be through the current corn-crop year, the continued placement of heavy feeder cattle in feedlots of 1,000 head or more has been surprising. While not as large as that of third-quarter 2008-10, the over-800-pound share of total placements during the third quarter of 2012 was well above historical levels. The share of total placements of heavy cattle during October-November 2012, 24.7 percent of total placements, was above the next highest October-November placement shares (in 2009) and above the 10-year average. The placements of both the lightest and heaviest feeder cattle during the last half of 2012 has led to a distribution of placements of feeder cattle in feedlots of 1,000 head or more that is more heavily weighted at both ends—more bimodal— than is typical. The number of feeder cattle on small grains pastures in the Southern Plains States—which will give some indication of the potential for heavy weight feeder cattle placements in March—will be among the information in the NASS Cattle report released February 1.



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