NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

September 3, 1998

The Market Advisor: How Many U.S. Beef Cows Are There and Where Are They?

Harlan Hughes, Extension Livestock Economist
NDSU Extension Service

Low slaughter cattle prices are having a profound affect on current feeder cattle prices. My analysis of beef cattle inventories suggests that current feeder cattle prices are undervalued. Beef cow producers need to stay on top of this cattle market to ensure that they do not sell undervalued 1998-born feeder calves or undervalued 1997-born feeder cattle.

My projections indicate that 1999 should be the year of the upturn in feeder cattle prices. My current budgets suggest that today's grass yearlings are currently undervalued and should be the first group of feeder cattle that will turn the slaughter cattle market from red ink to profits. Fast-track 1998 feeder calves (to be weaned at 600 pounds plus) are the second group of undervalued feeder cattle and are projected to slaughter in spring 1999 for a profit. The marketing of traditional-weight 1998 calves that will slaughter during the summer of 1999 maybe a little more challenging. The challenge for beef cow producers is to implement a marketing strategy that takes advantage of this projected price turnaround.

To develop such a strategy, beef cow producers need to take a look at how many beef cows are in the United States, know where the U.S. beef cows are located and know how Canada's beef cow numbers compare to the U.S. herd.

The USDA Jan. 1, 1998 All-Cattle Inventory numbers confirmed that the current cattle cycle is firmly into its liquidation phase. This inventory set the all-cattle number at 99.5 million head, down 2 percent from a year earlier. The most striking number was the 5 percent fewer beef heifers held for replacements. Instead of breeding 1996 heifers, we fed them.

The 1997 calf crop was down 3 percent, implying that there will be fewer feeder cattle on feed in the last half of 1998. As cattle numbers continue to decrease over the next two to three years, some feedlots are simply not going to have cattle to feed. The continued diversion of 1997 heifers to feedlots confirms that the current liquidation should continue into year 2000.

The USDA July 1998 mid-year All-Cattle Inventory Report showed that the liquidation phase of the national cattle herd is under way for the third consecutive year. Beef replacements are at the lowest levels since 1990 and the calf crop is the smallest in recent history. The July inventory confirms that beef cow producers will not be building the beef cow herd through at least Jan. 1, 2000; and given the biological lag, beef production will not increase until year 2002. While these All-Cattle Inventory reports suggest a significant feeder cattle price recovery, some analyst suggest that we will not see $80 slaughter cattle prices this cycle. During this current cattle number inventory downturn and beef production reduction, pork and poultry are backfilling total meat supplies. Some analysts also predict that instead of fighting the competition, that the beef industry's energies and resources will be spent fighting internally to keep the beef check-off.

The Jan. 1 cow inventory shows that we had 33.683 million beef cows. Beef cow numbers peaked in this cattle cycle in Jan. 1, 1996, and that number decreased in the Jan. 1, 1997, and in Jan. 1, 1998, inventories.

Most U.S. beef cows are located in the Great Plains and central United States. North Dakota had 872,000 beef cows Jan. 1, 1998. South Dakota has 1.559 million beef cows and Nebraska had 1.930 million beef cows. Missouri had 1.990 million beef cows, Oklahoma had 1.995 million beef cows and Texas had 5.460 million beef cows. The key here is Texas' 5.460 million cows.

The most striking beef cow numbers is the small number of beef cows in the West—8.42 percent of the total U.S. herd. Twelve percent of the nation's beef cows were in the Southeastern United States50 percent more than in the West.

The early summer drought in the western Canadian provinces and now the drought in the U.S. Southern Plains may well accent the current liquidation phase and the extent of liquidation should be confirmed by the Jan. 1, 1999 All-Cattle Inventory. I am told, however, that Texas has not yet culled many cows. Texas ranchers first moved yearlings off grass, then weaned early and moved calves to northern grass or feedlots. They have been purchasing low priced corn, alfalfa pellets, and hay, allowing them to keep the basic breeding herd in place. But they will need rain to grow their fall and winter feed supply. Without the rains, they will have to liquidate the breeding herd and cull cow sales could increase dramatically this fall and early winter.

It will take two things to turn U.S. beef cow numbers upward over the next few years. In fact, beef supply will decrease before it can increase. First, we have to reduce cow kill and we have been doing this in 1997 and to date in 1998. The current drought in the Southern Plains, however, may well increase cull-cow kill later in 1998.

The second condition for building the beef cow numbers is to divert heifers from feeding to breeding. We have not come close to doing that. The heavy diversion of 1996 and 1997 heifers to feedlots has ensured that all-cattle numbers will go down again in 1999.

U.S. beef cow producers also need to study Canada's cattle numbers and put the Canadian cow herd in perspective. While the U.S. had 99.5 million cattle as of Jan. 1, 1998, Canada had 13.157 million cattle in its inventory. The Canadian herd was 13 percent of the U.S. herd. Canada had 4.295 million beef cows as of Jan. 1also 13 percent of the U.S. beef cow inventory. The key point of all of this is that Texas, alone, has more beef cows than all of Canada. If northern plains beef cow producers want to assess what is happening to the beef cow sector, they need to look south rather than looking north, as is frequently suggested.

The reality is that we really have a North American beef cow herd that combines the U.S. and Canadian beef cow herd into to a 37.7 million beef cow herd. The sooner that we all think of this as one North American herd, the better.

If you have questions, contact me via e-mail at hhughes@ndsuext.nodak.edu or visit my web site at www.ag.ndsu.nodak.edu/cow/.

###

Source: Harlan Hughes (701) 231-7380 hhughes@ndsuext.nodak.edu

Editor: Tom Jirik (701) 231-9629

Click here for a pdf version of this graphic.

Click here for a pdf version of this graphic.