February 7, 2007


Vol. 23, Issue 3, February 7, 2007

Jose G. Peña
Extension Economist-Management

US. Cattle Inventory Up Slightly
Drought, High Feed and Energy Costs Slowing Down Rate of Increase

The U.S. cattle inventory increased slightly for the third year in a row, up 301,000 head (0.3%) from last year and up 2.2 percent from January 1, 2004 when the herd re-building cycle began. The inventory remains 6.3 percent below the 103.5 million head previous cyclical peak on January 1, 1996. (See Figure 1). According to USDA’s February 2, 2007 Cattle Report, all cattle and calves in the U.S., as of January 1, 2007, totaled 97.0 million head, up just slightly from 96.7 million on January 1, 2006 and up 1.6 percent from 95.438 million head on January 1, 2005. 02-07-07_Fig1

Beef Herd Down

While the report showed a slight increase in the size of the total cattle herd, the actual size of the beef herd, especially the inventory of the beef breeding herd, including beef cows, heifers for beef cow replacements and beef heifers expected to calve in 2007, decreased by close to 200,000 head. (See Table 1).

2000 2001 2002 2003 2004 2005 2006 2007 % CHNG 2006/07
x 1,000 Head
ALL CATTLE/CALVES 98,198 97,277 96,704 96,100 94,888 95,438 96,702 97,003 0.3%
COWS/HEIFERS THAT HAVE CALVED 42,759 42,580 42,299 42,125 41,851 41,920 42,056 42,023 -0.1%
BEEF COWS 33,569 33,397 33,118 32,983 32,861 32,915 32,994 32,894 -0.3%
MILK COWS 9,190 9,183 9,112 9,142 8,990 9,005 9,063 9,129 0.7%
ALL HEIFERS/500 LBS AND OVER 19,649 19,776 19,678 19,628 19,345 19,573 19,984 20,086 0.5%
BEEF COW REPLACEMENTS 5,503 5,588 5,561 5,624 5,518 5,691 5,904 5,877 -0.5%
EXPECTED TO CALVE ¹ 3,337 3,425 3,548 3,493 3,496 2,896 2,842 -1.9%
OTHER HEIFERS 10,147 10,131 10,057 9,891 9,806 9,763 9,805 9,899 1.0%
STEERS/500 LBS AND OVER 16,682 16,441 16,790 16,554 16,277 16,476 16,933 17,222 1.7%
BULLS/500 LBS AND OVER 2,293 2,274 2,244 2,248 2,206 2,219 2,263 2,215 -2.1%
CALVES UNDER 500 LBS 16,815 16,206 15,763 15,545 15,210 15,250 15,465 15,456 -0.1%
1999 2000 2001 2002 2003 2004 2005 2006
CALF CROP 38,796 38,631 38,280 38,224 37,903 37,505 37,575 37,567 0.0%

In addition, the inventory of other heifers (heifers on pastures bound for feedlots) increased 94,000 head from an inventory 9.8 million head on January 1, 2006. This increase, plus the increase in the dairy herd and the large number of cattle on feed account for most of the total January 1, 2007 inventory increase. It appears that last year’s dry weather, high corn prices and high energy costs have had enough of a significant impact to stop the growth of the U.S. beef cattle herd. While moisture conditions have improved in major parts of the West and in the southern Plains, longer term weather forecasts from the National Weather Service suggest a return of drought conditions this summer. Grass, hay and feed grains could remain expensive this year. This area accounts for approximately 60 percent of the U.S. cattle herd.

Prices Down

After record high prices for most beef cattle categories during winter ‘05-‘06, prices have weakened as the drought intensified and corn prices increased. (See Figure 2). While calf prices have weakened from last winter’s record highs and input costs, i.e., feed/energy costs, are up, prices for calves remain relatively attractive. This indicates that weather (cold/drought) and feed costs will be the key determinants of the future direction of the size of the U.S. cattle herd.02-07-07_Fig2


The continuing surge in corn demand for ethanol production has and will continue to have a significant widespread impact on U.S. agriculture, especially livestock agriculture as feed costs increase. This summer’s boom in ethanol plant development was influenced by high energy costs. Use for ethanol production has more than doubled since 2002 and is now expected to consume about 2.15 billion bushels of corn, or about 20.4 percent of this season’s entire U.S. corn crop. (See Figure 3). 02-07-07_Fig3

Plan for High Feed Costs

Keep in mind that increased demand for corn has resulted in sharply higher prices for corn, not a short crop. Demand driven corn prices will remain high unless corn production (or supplies of adequate substitutes or imports) increases significantly. While higher prices send a market signal for increased corn production, a crop of about 12 billion bushels of corn would be needed to make feed prices more economically manageable. Even with record corn yields in 2007, we would need to harvest about 4.4 million more acres of corn than were harvested this past season to come close to this level of production. This would mean planting about 82 million acres of corn to compensate for the historical harvested-to-planted ratio. With this past season’s average yields of 149.1 bu/ac., close to 89 million acres of corn would have to be planted. Where are these extra acres coming from? While we expect increased corn plantings, neither of these two scenarios appear very likely. As a result, cattle producers should plan to contend with higher feed costs as compared to the last few years of abundant supplies of corn and relatively inexpensive feed costs.

Calf Crop Down

The 2006 calf crop was estimated at 37.567 million head, down very slightly (0.02 percent) from 37.575 million calves born in 2005, but up 0.2 percent from a calf crop of 37.505 million head in 2004. Calves born during the first half of the year (spring 2007 feeder calf crop) were estimated at 27.4 million, up just slightly from 2005.

Feedlots Full

Meanwhile, feedlots appear behind in marketing, however, this past month’s winter storms have decreased productivity. According to USDA’s January 26, 2007 Cattle-on-Feed report, cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 12.0 million head on January 1, 2007, up one percent from January 1, 2006 and six percent above January 1, 2005. This is the highest January 1 inventory since the series began in 1996.

Cattle placements in feedlots during December ‘06, however, totaled 1.71 million, nine percent below December ‘05 and seven percent below December ‘06.

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