– Dr. Kenny Burdine, Livestock Marketing Specialist, University of Kentucky
The overall tone of the feeder cattle market has not been encouraging over the last month. CME© Feeder cattle futures have moved into the low $140’s. We were around these levels in late April, late June, and early July.
I’m not a technical analyst, but I think holding this level is pretty important. Local basis has actually been quite strong with a lot of groups of 9wt steers selling in the upper $130’s and low $140’s. A few groups on the lighter end of the 8wt range reached the $150’s. Smaller groups of 5wt steer calves have been selling in the mid $150’s.
USDA July 1, 2017 Cattle Inventory Estimates
| 2015
(1,000 hd) |
2017
(1,000 hd) |
2017 as % of 2015 | |
| Total Cattle and Calves | 98,200 | 102,600 | 104 |
| Cows and Heifers That Have Calved | 39,800 | 41,900 | 105 |
| Beef Cows | 30,500 | 32,500 | 107 |
| Milk Cows | 9,300 | 9,400 | 101 |
| Heifers 500 Pounds and Over | 15,700 | 16,200 | 103 |
| For Beef Cow Replacement | 4,800 | 4,700 | 98 |
| For Milk Cow Replacement | 4,200 | 4,200 | 100 |
| Other Heifers | 6,700 | 7,300 | 109 |
| Steers 500 Pounds and Over | 14,100 | 14,500 | 103 |
| Bulls 500 Pounds and Over | 1,900 | 2,000 | 105 |
| Calves Under 500 Pounds | 26,700 | 28,000 | 105 |
| Cattle on Feed | 12,100 | 12,800 | 106 |
| 2015 | 2017 | 2017 as % of 2015 | |
| Calf Crop | 34,087 | 36,300 | 106 |
Source: NASS, USDA
As expected, beef cow numbers were up about 7% over the last two years. It is well established that this herd has grown rapidly since 2015. This was partially in response to extremely high calf prices in 2014 and 2015 and also because weather has been favorable. This general expansion can be seen across the board in the report as one looks at breeding stock, cattle on feed, and the size of the calf crop. The one number that looks odd is the 2% decrease in heifers held for beef cow replacement and I thought it might be worth looking into that a bit more.
First, we have to remember that this is making a two-year comparison, rather than the single year comparison that we are used to seeing. Second, we have to consider the base year, which in this case was 2015. On July 1 2015, USDA estimated there were 4,800 heifers being held for beef cow replacement, which was the largest beef cow replacement number since 2006. So, we are comparing the 2017 number to a very large 2015 number. Remember how strong calf prices were in the summer of 2015 and how intense the interest in expansion was that year.
Another way that I like to look beef heifer retention is to consider it as a percent of beef cow inventory. Beef heifer retention at mid-year, as a percent of beef cow inventory, was above 15% in both 2014 and 2015 (remember there was not mid-year 2016 report). Clearly, both of these were expansion years. Beef heifer retention as a percent of beef cow inventory was 14.5% in July 2017. While less than what was seen in 2014 and 2015, this is still not a small number. In fact, with the exception of 2014 and 2015, we would have to go back to 2006 to find a larger percentage than the 14.5% seen this year. So, it is very likely that the growth rate of the US beef herd is slowing, but I do think it is still growing.
The USDA report is summarized in the table above and the full report can be accessed at: http://usda.mannlib.cornell.edu/usda/current/Catt/Catt-07-21-2017.pdf