Nalivka: On The Mid-Year Inventory
Volatility and uncertainty may accurately describe much of the beef industry’s feelings about the market outlook for 2020. How do we alleviate uncertainty - more information, right?
USDA released its July 1 Cattle Inventory Report on July 19th. I don’t spend a lot of time analyzing the numbers in that mid-year report but, the one number in the report that is worth watching is the first estimate of the calf crop – obviously. It isn’t the final number, but it is a first look and 73% of the calves are born during the first half of the year.
That calf crop estimate is the foundation number for analyzing supply. Consequently, it may be the most important USDA survey estimate – sorry Cattle on Feed reports! Not to get off topic, but we probably place too much weight on Cattle on Feed reports, particularly in the weight breakdown data.
In the recent report, USDA estimates the 2019 calf crop at 36.3 million head, down slightly from the prior year. This estimate is based on a June survey. Is the number reasonable? USDA indicates their average revision in the calf crop estimate over a 10-year period is 210,000 calves. Further, in 8 of those 10 years, the first estimate is higher than the last estimate.
Given the severe weather activity this spring during calving (from snow and cold to flooding), I think this will be one of those years when the first estimate is definitely higher than the second estimate. The survey probably didn’t capture all of the calf death loss and consequently, I think there will be a downward revision in this estimate when the next estimate of the 2019 calf crop is released in the January 1, 2020 inventory.
I have been estimating the 2019 calf crop at 36.2 million (March 10 forecast) - 100,000 less than USDA’s reported estimate. While 100,000 is not a large difference, it is the difference between “down slightly” and a 1% drop! If there are more heifers retained for replacements from this year’s calf crop, which I believe will be the case, then those minor differences become even more important with regard to the feeder cattle supply for 2020.
