U.S. beef cow slaughter during 2014 was 2.6 million cows, the first time this number has been below 3 million since 2006. Since 1990, when beef cow slaughter falls below 3 million, the beef cow inventory normally sees an increase the following year.

Given the improvement in pasture and range conditions last year, this likely will be the case when USDA releases the results of its survey of producers at the end of January. Expectations are that the beef cow inventory grew by approximately 0.5% during 2014 as a result of improved pasture and range conditions combined with a rapid decline in beef cow slaughter. Increased heifer retention will also factor into the expected increase, although there is little data on where retention is the strongest until USDA releases its inventory report.

Analyzing regional cow slaughter data can provide some indication of where herd building was likely the strongest during 2014. Information about the ten different regions is included in the table below. Confidentiality rules result in regions 5, 7, and 8 being grouped together. Regions 5, 7, and 8, and 9 both had greater declines in beef cow slaughter than the U.S. total suggesting herd expansion may be the strongest in those regions. However, the closing of a packing plant combined with the severity of the drought suggests whatever growth occurs in region 9 will likely be small, if it occurs at all.

Understanding what is going on in regions 5, 7, and 8 is complicated because region 5 was not reported individually in 2013 but was during 2014. From 2005-20012, region 5 annually culled approximately 748,000 beef cows, so the 25% decline to approximately 562,000 beef cows this year is significant enough to suggest some herd expansion may be occurring. How much remains to be seen as this region is a major crop producing area that has seen a decline in pastureland since 2007.

That leaves regions 7 and 8 which have been reported collectively since 2011. Compared to the average beef cow slaughter rate in 2011-2012, these regions experienced a decline of approximately 19% in 2014. Adjusting for the inclusion of region 5 in 2013, beef cow slaughter for regions 7 & 8 in 2014 was likely down closer to 11% to 13%, a few percentage points below the national rate. Based on historical data, region 7 had a larger slaughter rate than region 8 which likely continues through today.

Although regional beef cow slaughter doesn’t provide a clear picture on where expansion is occurring, there are still some takeaways from looking at the decline in beef cow slaughter rates in 2014. Beef cow slaughter in 2015 could be smaller than the 2.6 million head culled during 2014, if pasture and range conditions permit. Many areas that have experienced drought in recent years are in the process of recovering to pre-drought levels which would slow the number of cows available for slaughter. Higher prices for slaughter cows are the likely result in 2015 which may result in slaughter cow prices not experiencing seasonal price declines. Slaughter cow prices rose through much of 2014 and could happen again in 2015, or at the very least see little decline. Lower milk prices may result in an increase in dairy cow slaughter during 2015 which could put pressure on slaughter cow prices depending on the rate of dairy cow culling.

Imports from Australia and New Zealand were also up through November indicating how tight U.S. lean ground beef supplies were during 2014. Continued high level of imports are also likely from these two countries during 2015 to meet U.S. demand for ground beef. However, there is not a limitless supply of lean ground beef internationally. Higher prices will be needed both to obtain supplies and ration consumer demand for ground beef in 2015.

Region

States Included

2014 Beef Cow Inventory (thousands of head)

Percent of 2014 U.S. Inventory

Percent of 2014 U.S. Beef Cow Slaughter

Change in Beef Cow Slaughter (2014 to 2013)

1 & 2

CT, ME, NH, NJ, NY, VT, MA, RI

150.5

0.5%

0.4%

53.8%

3

DE, MD, PA, WV, VA

1,058.8

3.6%

4.7%

-0.3%

4

AL, FL, GA, KY, MS, NC, SC, TN

4,915.0

16.9%

14.2%

-11.7%

5

IL, IN, MI, MN, OH, WI

1,548.0

5.3%

21.6%

-17.8%1

6

AR, LA, NM, OK, TX

7,434.0

25.6%

24.6%

-16.3%

7

IA, KS, MO, NE

5,916.0

20.4%

26.6%2

-17.8%1

8

CO, MT, ND, SD, UT, WY

5,773.0

19.9%

26.6%2

-17.8%1

9

AZ, CA, HI, NV

1,072.8

3.7%

5.8%

-35.3%

10

AK, ID, OR, WA

1,174.3

4.0%

2.2%

-0.4%

U.S.

 

29,042.4

100.0%

100.0%

-16.7%

Source: USDA NASS, LMIC
1 Reflects regions 5, 7, and 8
2 Reflects regions 7 and 8

January USDA NASS Cattle on Feed Report summary: Pre-Report Estimates

 

1,000 head

% of Prior Year

Avg.

Range

 

Placed in December  

1,544

92.0

96.1

92.3 – 102.0

 

Marketed in December

1,655

95.3

95.8

92.3 – 100.0

 

On Feed January 1

10,690

100.9

101.5

100.8 – 102.4

 

This month’s report placements and total inventory on feed came on the low end of the pre-report expectations. Placement of cattle weighing at least 800 pounds was up 2.6% with other weight categories down at least 8% compared to December 2013. Only Idaho and Iowa saw a year-on-year increase in placements with most major feedlot states seeing a decline of at least 8% (Nebraska only saw a 2% decline). There was one additional working day during December 2014 compared to 2013. The numbers of steers on feed was 2.3% higher than a year ago with heifers down 1.6%. The number of heifers on feed was the lowest since 1996.

Corn futures were slightly higher on the week except for the nearby March contract. Weather conditions continue to be favorable in South America for crop development. Lower crude prices and ethanol inventories are providing some pressure on corn futures, but producers’ reluctance to sell is allowing futures to stay at their current level. The rally in the US dollar has put corn under additional pressure in recent weeks.

Live cattle futures were lower during the week, with nearby contracts seeing a bigger decline than the deferred contract months. Wholesale beef prices put futures under pressure along with weakness throughout the livestock market. Feeder cattle futures were also lower on the week as live cattle futures in the $140s suggests feedlots may need to be in the $190s to breakeven. Cash prices for live and feeder cattle continue to be above futures for the time being. Whether this month’s Cattle on Feed report is enough to provide support for these markets next week will be interesting to watch.

Cash fed cattle sales were $159/cwt to $160/cwt in Nebraska and Kansas with dressed prices at $256/cwt in Nebraska. Live prices are $3/cwt to $4/cwt lower than last week. Sales were light on light demand for most of the week.

*Prices are for Medium and Large 1-2 Steers
**Mississippi prices are for midpoint of 400-500 and 500-600 steers
Note zero values in table represent no reported sales for that weight group.
Source: USDA AMS