The U.S. Department of Agriculture’s mid-year cattle inventory report estimated the supply of feeder cattle and calves outside feedyards totaled 39.3 million head, up 100,000 head compared to last year. But the mid-year report also found a smaller cowherd that produced 170,000 fewer calves than last year, the lowest level in more than 50 years. The total inventory was estimated at 104.8 million head on July 1, down about 400,000 compared to 2006. The beef cow herd totaled 33.35 million head, which is the smallest mid-year cow herd since 1990. The report suggests supplies of stocker cattle will remain tight over the next couple of years, which will lend support to prices.

Market analysts believe the inventory report will provide support to cattle markets through 2009. American Farm Bureau Federation livestock economist Jim Sartwelle says that heifers held for beef cow replacement were down 6 percent from July 2006. “In one year, beef replacement heifers dropped by 300,000 head,” he says. “That number alone indicates reduced calf supplies through 2008. The heifer that does not get kept back for breeding purposes in 2007 does not produce a calf in 2008 and does not yield a fed steer or heifer for harvest during 2009.”

Sartwelle said cow-calf operators have seen strong calf prices for the last two years, so there have been plenty of incentives to build cow numbers. But expansion has been stalled by dry weather in parts of the intermountain West and the Southeast.

The calf crop for the first six months of 2007 is estimated at 27.15 million head, down 200,000 head from January through June 2006. That figure also supports continued strong cattle and calf markets for the next 24 to 30 months, Sartwelle says.

“We have questioned what the effect of the 2006 drought in Texas and the Southwest would be, and it is now apparent there was at least a slight dampening effect on rebreeding brought on by drought stress. The bottom line for this semi-annual inventory report is the current cattle cycle might be one of the shortest ever, continuing to squeeze calf and feeder cattle supplies. This supply squeeze will continue to mitigate much of the volatility of the corn market.”

Follow this link for the USDA inventory report (PDF format).