July 19, 1999
BROOD COWS BRING ELUSIVE
In a year of so
much farm financial concern, brood cow herds will show nice profits.
The USDAs mid-year Cattle Inventory report shows
that the number of cattle in the nations herd continues
to edge lower. At 106.8 million head, the total inventory is down
1 percent from last year and 2 percent from two years ago.
The declining population
has been led by another drop in the beef cow herd. At 34 million
head, the herd is down 1 percent from last July. The beef cow
herd reached a cycle peak in 1995 and has declined 6 percent since
that time. The continued decline has been stimulated by poor returns
and discouragement among cattle producers. For the future, it
looks like additional reductions in the breeding herd are planned
as the number of beef heifers being retained for replacements
in herds is down 4 percent. Inventories are not sufficient to
keep cow numbers at steady levels.
Dairy cow numbers
also declined about 1 percent. Record high milk prices in the
fall of 1998, however, stimulated more heifers to be retained
for addition to the milk cow herd. Those numbers are up 3 percent
and will likely lead to an increase in the number of milk cows
of steers and heifers will be little changed in the last-half
of 1999 compared with the same period in 1998. The number of heifers
which are not being retained for herd replacement is unchanged
from last year and the number of steers is down only 1 percent.
Steer and heifer
supplies for 2000 will be down only modestly as the current number
of calves weighing under 500 pounds is unchanged from last year.
The expected 1999 calf crop is down a little less than 1 percent.
Interestingly, the 1999 calf crop is expected to be the smallest
since 1952. Of course, the period from the 1950's to the mid-1970s
saw cattle numbers increasing dramatically. Per capita beef consumption
reached a peak of 94 pounds in 1976. In the year 2000, consumption
per capita is projected to drop to about 65 pounds. While the
U.S. population has increased, cattle marketing weights have also
increased, reducing the number of cattle required.
One of the major
questions regarding slaughter supplies will be the number of cows
that are sent to market. With expectations of higher cattle prices
in the year ahead, a lower rate of cow liquidation can be anticipated.
Slower liquidation will help to further reduce slaughter supplies.
The number of cattle
on-feed on July 1 stood at 9.6 million head, up 4 percent from
last year. June placements were up 14 percent and marketings in
June were up 5 percent. Cheap feed and prospects for higher fed
cattle prices have stimulated the movement of cattle into feedlots
this spring and summer. Not only are more cattle going on-feed,
but they are moving to feedlots at a younger age. As an example,
the number of calves weighing under 600 pounds placed in June
were up 12 percent.
There has been much
anticipation that beef supplies would be declining in the last-half
of 1999 and in 2000. A drop in supplies will depend on two important
factors. First, as already mentioned, a decline in the rate of
cow slaughter. This now appears more likely due to increase in
the fed cattle prices, but especially because of higher calf prices.
Higher calf prices have been stimulated more by cheap feed than
by higher fed cattle prices. In addition, pasture conditions have
been more favorable this summer, helping to keep forced liquidations
lower. Cattle weights, however, will be higher in the coming year
as a result of low priced feed. So far in 1999, cattle weights
have been up 1.2 percent over the same period in 1998. Next year,
a 1 percent to 2 percent decline in slaughter will largely be
offset by a similar increase in weights. This means that beef
supplies will be down only modestly.
in beef supplies can still help prices since population growth
will be a positive demand factor. However, record total supplies
of meat in 1999 and 2000 will keep competitive pressure on beef.
Total meat and poultry supplies are expected to reach 217 pounds
per person this year and, with cheap feed, may increase in 2000.
Prices of calves
are expected to remain strong this fall. With a small reduction
in the number of calves and strong demand due to low feed prices,
400 to 500 pound steer calf prices in the eastern corn belt are
expected to average in the very high $80s and $90s this fall.
That would be up sharply from prices in the $70s a year-ago.
Fed cattle prices
may still weaken modestly by the end of summer, but improvement
is expected for the fall, with prices moving back into the $66
to $68 range. Some further strength can be expected in the winter
with prices in the high $60s. Spring highs could reach slightly
Brood cow operations
will show strong returns for their 1999 calves due to higher calf
prices and low grain prices. Returns to cattle feeding look more
marginal with high calf prices, higher interest rates, and only
slightly higher fed cattle prices.
Issued by Chris