Cattle estimates suggest more liquidation ahead

Liquidation of the U.S. cattle herd could continue beyond this year, based on the latest inventory estimates.

USDA pegged all cattle and calves nationwide at 89.3 million head as of Jan. 1, down 3% from last year, in its biannual cattle inventory report.

All cows and heifers that have calved, 38.3 million head, also declined 3% compared to the previous year.

“For the most part, the main categories we watch in this report, the total cattle herd and specifically the beef breeding herd numbers, were pretty much under trade expectations,” Rich Nelson, chief strategist at Allendale Inc. in McHenry, told FarmWeek.

“It’s the smallest total cattle herd numbers since 2015 and, more important for the discussion are future supplies. Beef cows are down 3.6%.”

USDA pegged total beef cows at 28.9 million head as of Jan. 1. It’s the smallest supply since 1962, according to Nelson.

Meanwhile, the supply of beef replacement heifers (5.16 million head) declined nearly 6% from a year ago while milk replacement heifers (4.34 million head) slipped 2% lower than the previous year.

“Not only did we finish four years of liquidation of beef cow numbers, but we still have a few years ahead with these smaller heifers still lined up the next couple years,” Nelson said.

“The long-term supply decline was not only confirmed (in the Jan. 31 report), but we confirmed it was a little more than the trade expected,” he noted.

“Certainly as we go into 2024 to 2026, we’re looking at extremely tight beef supplies.”

Ongoing contraction in the cattle industry has been spurred by a number of factors, primarily centered around multi-year drought issues in the western U.S., tight feed supplies and subsequent high input costs.

Live cattle futures reached new contract highs last week.

After the Jan. 31 report, live cattle future prices sat at $158 per hundredweight for February and $163 for March.

“After this (first week of February), I’m not sure how much futures can extend recent gains,” Nelson said. “The interesting thing is we’re not yet into the tight supply portion of the 2023 picture. That really starts in the second quarter and accelerates into the fourth quarter.”

Overall, the report pegged all cattle and calves on feed for the slaughter market in all feedlots at 14.2 million head as of Jan. 1, down 4% from last year.

The number of steers (16.1 million head) and bulls (2.03 million head) weighing more than 500 pounds declined 3% and 4%, respectively, from a year ago while the count of calves under 500 pounds (13.6 million head) dipped 3%.

In Illinois, inventory numbers remained steady with all cattle and calves totaling 1 million head and all cows and heifers that calved at 420,000 head, both unchanged from the previous year. The 2022 calf crop was pegged at 365,000 in the state, down 1% from the previous year.