Today we review the cattle markets, the cattle inventory report, and the cattle price outlook for the near term.
Upcoming Dates
February 11 – WASDE, OCE
February 11 – Season Average Price Forecasts, ERS
February 11 – Hemp Learning Session, Dimmitt (Click here for details)
February 13 – Crop Profitability Meeting, Gray County
DEADLINE APPROACHING
March 3 – High Plains Dairy Conference (Click here for details)
Cow Herd
We closed last week with the bi-annual cattle inventory report. Average pre-report estimates estimated a decline in beef cows of around 0.8%. The decline in beef cows compared to the previous was actually closer to a full 1%. What does that mean for our long term price outlook, and how did we get there?
January 1 Cow Inventory
First, the size of the cow herd is an early indicator of (1.) the number of calves in the near term and (2.) the number of beef in the near-intermediate term. More cows = more calves = more beef, and vice versa. So, with a 1% decline in the cow herd we should expect, all else equal, about 1% fewer calves than the cow herd produced last year. Subsequently, with fewer calves in feed yards at the end of the year we would expect less beef supply a year or two from now.
Where did the cows go? As calf price has declined over the last five years the incentive to retain heifers or keep cows for one more calf has declined. Even with low cull cow prices, low calf price has made each cow a little less profitable, and sent a signal to sell. This has largely happened in the middle of the country.
Change in Beef Cows by State, 2019 to 2020
There were early signals of the decline in the cow herd. Cow and heifer slaughter have increased year over year for several years. Beef cow slaughter has seen substantial growth recently. More cows being processed means fewer cows having calves, lowering calf supply.
Beef Cow Slaughter
Overall, a lower cow herd is a bullish indicator for price. Feeder calf price has declined recently, largely on total market runs from the coronavirus. However, fewer calves in the fall with sustained demand signals higher prices for calves in the fall of 2020 than we saw in 2019.
Chart Challenge
First, we have the answer to last week’s chart challenge. The graph I presented is a categorized chart of the value U.S. agricultural exports to one of our USMCA partners, Mexico.
U.S. Agricultural Exports to Mexico
The mystery chart this week is on theme with the post again. We discussed the cattle market and the impacts of the cow inventory report. Below, the graph represents a value discussed in the post above. We’ll provide a chart label next week!
