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February 11, 2005 Market Advisor: U.S. Cattle Herd Begins Cyclical Expansion
After eight years of cyclical decline, cattle numbers finally rebounded in the second half of 2004. The USDA annual cattle inventory report, released Jan. 28, showed an increase in the U.S. cattle herd for the first time since 1996. The report indicated 95.8 million head of cattle were on U.S. farms and ranches on Jan. l, which is 1 percent above the 94.9 million head recorded in 2004. The higher numbers were not a surprise to most cattle market observers because of the much improved moisture conditions in many Southern and Western cattle producing states. Above average cow-calf returns also fueled herd rebuilding in states with a return to normal pasture and range conditions. The beef cowherd, at just more than 33 million head, was up 194,000 from the 32.8 million in 2004. Expansion was especially evident in several southern Plains and western Corn Belt states. For example, beef cow numbers increased 85,000 head in Oklahoma; 61,000 in Nebraska; 36,000 in Missouri; 29,000 in Iowa; and 27,000 in Colorado. The northern Plains states of North and South Dakota, which have been experiencing abnormally dry conditions west of the Missouri River, saw more modest increases in beef cow numbers of 10,000 and 9,000 head, respectively. The lingering severe drought conditions in parts of the northwestern United States continued to cause cattle liquidations, with beef cow numbers declining 40,000 head in Montana; 30,000 in Washington; and 13,000 in Idaho. Continued herd expansion is expected, as beef cow numbers are still 2.264 million head below the previous cyclical peak that occurred in 1996. Beef heifers kept for replacement also increased almost 228,000 head to 5.746 million. However, less than 3.6 million are expected to calve in 2005. In general, states that saw expansion in beef cow numbers also experienced increases in heifers kept for replacement. Cattle herd expansion will have both short- and long-term price implications for feeder cattle and replacement heifer prices. The 2004 calf crop was 1 percent below the previous year, so feeder cattle supplies are at cyclically low levels. Improved moisture conditions in much of the cattle producing area and historically low cow numbers will result in a good demand for lightweight feeder cattle suitable to place on grass this spring. Prices for lightweight feeder cattle are usually high in the spring due to seasonally lower supplies and summer grazing demand. Prices for feeder cattle weighing less than 600 pounds should continue to increase into the April/May peak demand period. Furthermore, even if the Canadian border is opened to feeder cattle imports this spring, those cattle must go to feedlots and cannot be placed in pasture grazing situations. Heavier weight feeder cattle prices usually decline into April as increasing numbers of cattle are marketed from winter wheat pastures and out of backgrounding lots. The USDA report indicates that 7 percent more cattle are on wheat pastures this year in Kansas, Oklahoma and Texas. As these cattle are moved to market this spring, seasonal price weakness can be expected. However, replacement quality heifers this spring likely will see $5 to $10 per hundredweight premiums over heifers purchased by feedlots as the interest in herd rebuilding intensifies. In the longer term, cattle numbers are likely to continue increasing cyclically through the end of the decade. Eventually, as offspring from increasing cow numbers and heifer retention are marketed, beef production will increase and prices will decline cyclically. ### Source: Tim
Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu |
Market Advisor: |
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North Dakota State University |
