July 25, 2002

Market Advisor: Cattle Herd Continues to Decline

Tim Petry, Livestock Marketing Economist
NDSU Extension Service

USDA released two important cattle reports July 19. The USDA July 1 Cattle Inventory Report indicated a U.S. total cattle inventory 0.6 percent smaller than a year ago. The total number of cattle and calves in the U.S. was 105.2 million head, down 600,000 head from July 1, 2001 and now eight million head smaller than the previous cyclical peak in 1996.

The USDA Cattle on Feed Report indicated that on July 1 total cattle on feed in all feedlots in the U.S. was at 12.4 million head, down 5 percent from the 13 million head a year ago. Net placements into feedlots in June were almost 16 percent lower, with cattle weighing less than 800 pounds down more than 18 percent and cattle weighing more than 800 pounds down about 8 percent. The number of cattle marketed from feedlots in June was also down about 2 percent compared to last year. The lower placements will be supportive to fed cattle prices in the fourth quarter, but the relatively larger portion of heavyweight placements will tend to limit prices in the near term.

Both reports were close to trade estimates and had little impact on prices. Complete copies of the reports can be accessed at the USDA National Agricultural Statistics Service (NASS) website at www.usda.gov/nass. 

Beef cow numbers were down slightly at 0.4 percent and milk cow numbers were up 0.5 percent. Milk replacement heifers were up 2.8 percent, reflecting the high prices that have been paid for replacement heifers this past year. Beef replacement heifer numbers were unchanged from last year as a result of drought conditions throughout many of the western, plains, and southeastern cattle producing states. The mid-July U.S. pasture and range conditions report indicated 39 percent very poor or poor conditions versus 26 percent a year earlier.

Even though cattle numbers were lower, beef production remained high. January through June cattle slaughter was down 0.1 percent, but beef production was up 3.5 percent. Steer and heifer carcass weights averaged 28 pounds heavier the first half of 2001. Heavyweight cattle have been a concern for the industry since the fall of 2001.

Inventory numbers on a state-by-state basis were not tabulated for the July report but will be available in the January 2003 USDA Cattle Inventory Report. Continued liquidation of cattle is likely in the drought plagued plains, western, and southeastern states. Last year, beef cow numbers were up 4,000 head in North Dakota but were down 80,000 head in Montana and 17,000 head in South Dakota. This year numbers will likely fall in North Dakota due to drought conditions in much of the south central and southwestern portions of the state.

Early movement of feeder cattle to market from the drought affected states is likely. Feeder cattle prices in 2002 have averaged from $10 to $15 per hundredweight lower than 2001. USDA is now predicting fourth quarter 2002 prices to be near levels of the sharply lower fourth quarter 2001 prices.

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Source: Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu
Editor: Gary Moran, (701) 231-7865, gmoran@ndsuext.nodak.edu