Buckle Up: Here's Why USDA's Latest Cattle Inventory Report Could be a Turning Point for Prices
Inventories and Markets 020222
USDA released the latest cattle inventory report earlier this week, and it confirmed contraction is taking place in the U.S. cattle herd. As economists weigh in on what the latest numbers could mean, one veteran economist thinks cattle prices won't just see strength into spring, but possibly finish the year with even stronger prices.
"The inventory report gives absolute confirmation of the contraction and numbers," says Don Close of Rabo AgriFinance told AgDay's Clinton Griffiths during NCBA's annual Cattle Industry Convention and Trade Show.. "And while we've still got a front end load of cattle on feed to work through, clearly, we will reflect back and see the report was the turning point where the fallout from reduced numbers will start dictating prices
the market."
Highlights from the annual Cattle report issued by USDA’s National Agricultural Statistics Service (NASS) include:
- U.S. cattle herd shrank by 2% last year
- Total number of cattle and calves on farms and in feedlots was estimated at 91.9 million head.
- Beef cow herd also declined by 2% to 30.1 million
- Heifers intended for replacement fell about 3% for both dairy and beef.
- The all cattle on feed totaled 14.7 million head, up slightly from 2021.
Drovers reports the total inventory and the beef cow numbers were both lower than what industry analysts had expected. The cattle on feed number was higher than the trade expected.
Close points out that once the industry works through the cattle currently on feed, producers could actually see counter seasonal prices in 2022.
"The price outlook we've had on fed cattle is a $146 for Spring high, and there's been several times I've looked at it and do I need to back that off? And I haven't," Close told Griffiths. "I think that's still a realistic goal for spring."
he says for summer, he thinks fed cattle prices could back off and trade closer to the mid $130s, but he expects prices to pick up pace to close the year.
"Yesterday's report setup is we are in position to see that counter seasonal play where fourth quarter prices take out our spring high, so we're we should close '22 with a very strong market," says Close.
