Nalivka: A Deep Dive Into The Cattle Inventory

Beef cow slaughter year-to-date through the first week of October was 11% higher than last year, and that followed 2017's increase of 11%.
Beef cow slaughter year-to-date through the first week of October was 11% higher than last year, and that followed 2017's increase of 11%.
(Wyatt Bechtel)

Over the past few months, I have mentioned where the U.S. cattle inventory may be headed given the level of cow and heifer slaughter this year.  I don’t want to get ahead of myself, but with 9 months of the year now behind us, the analysis of changes in the size of the U.S. cattle herd on January 1, 2019 are likely somewhat predictable. So, let’s a take deeper dive into the numbers.

Forage supplies and profitability and their impact on decisions concerning cows and heifers are the key drivers to the cattle cycle.  This year, forage has been the main driver on decisions concerning cows, with beef cow slaughter year-to-date through the first week of October 11% higher than the prior year.  This has been the case since early 2018, and beef cow slaughter in 2017 was up 11% from 2016’s 12% increase over 2015 for the same period.

For 2018, year-to-date beef cow slaughter is the highest since 2013.  That is mainly due to forage, as drought has taken a toll this year.  So, that’s the first part of the equation to changes in the size of the herd, and three years of high cow slaughter definitely do not support continued herd expansion.  The sharp increase in cow slaughter during 2016 was probably more closely tied to the sharp drop in prices from the record highs of 2014 and 2015, as well as the age of cows with sharply reduced culling in those years as well. 

When cattlemen expand herds, cow slaughter will run closer to 9% of the cow herd or even lower with aggressive expansion. In 2015, the industry culled and harvested only 7.7% of the cow herd and the lowest in my calculations back to 1965.  I have pegged the percentage at 9.8% this year and the highest since 2013.  In 2017, 9.1% of the beef cow herd was harvested.  I am projecting the number of beef cows in the cattle herd at the beginning of the year at 31.65 million compared to 31.723 million at the beginning of this year.

The second consideration in the cattle cycle is decisions concerning heifers.   Heifers harvested in 2018 tear-to-date through early October is up 7% from 2017’s 12% increase over 2016’s, a 2% increase over 2015 for the same period.  Heifer retention dropped sharply in 2016 when prices fell.  Consequently, heifers went to the feedlot and heifer slaughter jumped last year and will again this year.

So, if the number of beef cows at the beginning of 2019 is down about 75,000 head from the 31.723 million at the beginning of this year, and beef cow slaughter this year is 3.1 million, the number of heifers that were bred at the beginning of this year and calved would be 3.5 million, down 8% from 2017.   This represents a heifer retention rate in 2016 of 11.6% and the lowest since 2015.  Improved forage conditions and a better-than-expected market in 2018 should lead to increased heifer retention this fall and barring any unforeseen circumstances, these heifers will be bred next year to calve in 2020.

I am projecting the total cattle inventory on January 1, 2019 to be 94.3 million and about even with the herd tally at the beginning of 2018.          

 

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