Cattle inventory smallest in years

The U.S. Department of Agriculture’s January and July Cattle Inventory reports, released toward the end of each respective month, provide the total inventory of beef cows, milk cows, bulls, replacement heifers, other steers and heifers, and the calf crop for the current year. With drought and high input costs compelling farmers to market a greater-than-normal percentage of female cattle, the most recent cattle inventory decreased to numbers not seen in decades. Market Intel will provide analysis of the Jan. 1 inventory, which will set the tone for cattle markets in 2024.

It is a bullish report. All cattle and calves on Jan. 1, 2024, in the United States were at 87.2 million head, which is two percent less than in 2023. That is the lowest Jan. 1 inventory since USDA’s 82.08 million estimate in 1951. The calf crop is estimated at 33.6 million head, which is two percent less from this past year and the smallest calf crop since 33.1 million in 1948.

To understand the implications of that report the individual inventories, including all beef cattle and beef heifers for replacement, need to be broken down. The inventory of all U.S. beef cattle on Jan. 1, 2024, was 28.2 million head, which is a decrease of two percent, or 700,000 head, from Jan. 1, 2023. The 2024 decline follows a four percent decrease in the beef herd inventory from 2022 to 2023. That is the smallest U.S. beef herd since 1951.

Heifers kept as beef cow replacements were estimated at 4.86 million head, which is a decrease of one percent from 2023. While the inventory of beef cattle is lesser, that is a small year-over-year decline in replacement heifers compared to the six percent decline in 2022 and may be an indicator that the contraction phase of the cattle cycle is beginning to slow.

There is a strange situation underway with cattle on feed. Despite the historically low cattle and beef cattle inventory, the supply of cattle on feed for market is curiously high. All cattle and calves on feed for all U.S. feedlots is estimated to be 14.4 million, which is an increase of two percent from 2023. That means there are still plenty of cattle available to meet packer needs for now, which will keep beef prices from increasing dramatically in the short term. However as the cattle-on-feed supply begins to decrease based on lesser numbers further along the supply chain, packers will have to compete to secure cattle, which should lead to greater prices for cattle feeders, especially in the second half of 2024. The smallest calf crop since 1948 and a one percent decline in replacement beef heifers from this past year indicate that when the current supply of cattle on feed dries, there won’t be as many cattle available to refill the supply chain. That could send beef prices to record levels in 2024 and 2025, as the supply bottom of the current cattle cycle is hit.