February 1, 1999
CATTLE INVENTORY DECLINE MEANS
LESS BEEF IN 1999
The USDA Cattle
Inventory shows that the size of the beef and dairy herds
declined about 1 percent in 1998. With smaller supplies of fed
cattle, as well as smaller cow and bull slaughter, beef supplies
will be down about 4 percent in 1999. The larger drops in supply
will come in the last-half of the year, while moderately smaller
beef supplies will compete with burdensome pork supplies in the
first-half of the year. Cattle prices should increase as 1999
As of January 1,
the number of beef cows was at 42.6 million, a reduction of 1
percent from last year and 5 percent lower than in 1996 when beef
cow numbers reached the most recent peak. The number of milk cows
dropped to 9.1 million head, a decline of 1 percent for 1998.
that the beef herd will continue to drop throughout 1999, but
that the dairy herd could stabilize or even increase. The number
of beef heifers being retained to go back into the breeding herd
was down 4 percent. This means that the beef cow herd will continue
to decline, at least until the inventory report in 2000. Beef
supplies should continue to drop through the year 2001. The decline
in cow numbers is related to the disappointing earnings for brood
cow operations in 1998 and to the Southwest drought last year.
The number of dairy
replacement heifers was up 2 percent, indicating a rapid expansion
of the dairy herd. Milk producers appear to be responding quickly
to record high milk prices. This trend will be supportive to beef
prices as heifers find their way back into milk production and
not into slaughter supplies.
The beef cow industry
continues to become more concentrated in the Great Plains. In
1998, the total number of beef cows dropped by about 400,000 head.
Declines were as follows: Mountain and Western States down 200,000;
South and Southeast down 200,000; Eastern Corn Belt down 70,000;
and the Western Corn Belt unchanged. The number of beef cows increased
by about 75,000 in the Great Plains. The largest increases were
in the Dakotas, Kansas, and Texas. Oklahoma, apparently feeling
the effects of the 1998 drought, had a decrease of 100,000 cows.
The Texas beef herd actually increased by 20,000 cows, a surprising
result given the reports of widespread herd liquidation during
last summers drought.
Beef supplies should
decline in 1999. Calves weighing over 500 pounds will supply the
bulk of fed cattle for the first-half of the year. The number
of steers weighing over 500 pounds was down 2 percent, and non-replacement
heifers weighing over 500 pounds were down 1 percent. This smaller
fed supply will be coupled with a decline in cow and bull slaughter.
Beef supplies should decline by 2 to 3 percent in the first-half
of the year. Per capita beef supplies will drop 3 to 4 percent.
Beef supplies for
the last-half of 1999 will come from the calves weighing under
500 pounds on January 1. Those numbers were down 1 percent. Assuming
that the cow and bull slaughter will slow in the last-half of
1999, beef supplies are expected to be down in the range of 4
to 6 percent. The slowing of cow and bull slaughter is related
to the high rates of slaughter during last summers drought
and to the slowing of herd liquidation as beef prices begin to
recover. Per capita beef supplies in the last-half of the year
will be down 5 to 7 percent.
Prices of fed cattle
and feeder cattle should increase through the year. Huge pork
supplies will provide difficult competition in the first-half,
but easing of both pork and beef supplies in the second-half will
provide the basis for higher prices. Fed cattle prices on the
Plains are expected to average in the lower $60s in the first
quarter and in the mid $60s in the second quarter. Summer prices
should be able to hold the mid $60 level with some possibility
of prices in the higher $60s at times. Finally, the last quarter
of the year is expected to find prices trading in the higher $60s
with movement into the lower $70s possible for the late winter
Calf prices are
also expected to move higher through the year. The price of southern
Illinois and Indiana steer calves weighing 500 to 550 pounds averaged
in the mid-to-higher $70s in the last-quarter of 1998. These prices
are expected to move up to the lower $80s this spring, and could
reach the mid-to-higher $80s by the fall.
The rising prices
anticipated for 1999 mean that producers should continue to maintain
ownership of cattle. For brood cow operations, this means consideration
of adding more weight to calves on-hand, to retained ownership,
and to maintaining the number of cows in the herd. For feedlots,
this means keeping lots full of feeder cattle and considering
delaying the pricing of the finished cattle.
Issued by Chris