Does 2019 Mark the End of Beef Herd Expansion?

 

After some delay due to the federal government shutdown, USDA released their January 1 estimates for cattle inventory on February 28th. At the national level, beef cow numbers were estimated to have grown by 1% from 2018. This is a lower rate than was seen last year, but growth nonetheless. Going back to 2014, the beef cow herd has grown by almost 10%. Heifer retention estimates provide further evidence that herd growth is slowing as the number of heifers held for beef cow replacement was down by 3%.

 

My preferred way to consider heifer retention is to look at it as a percentage of beef cow inventory. Based on these most recent estimates, heifer retention is running at 18.7% of beef cow inventory, which is slightly above the average going back to 1973 (see figure 1). Figure 1 really illustrates how high heifer retention was during the 2015-2017 time period, running above 20% in each of those three years. When one considers recent cow slaughter volume, and the likely age of this cow herd, it is my opinion that this level of heifer retention is probably about at replacement level for the current level of beef cow inventory.

 

Figure 1: Jan 1 Beef Heifer Retention as a % of

Beef Cow Inventory (1973 to 2019)

 

 

Last year’s report was a bit of an oddity as total cattle-on-feed numbers were estimated to be up 7% from 2017. Much of this was due to poor winter grazing conditions, which led to unusually high feedlot placements in fall 2017. The 2% increase in cattle-on-feed seen in the 2019 estimate is largely in-line with the increase in the size of the 2018 calf crop. There was also a sizeable increase (+27%) in cattle grazing small grains in Kansas, Oklahoma, and Texas, which serves as a gauge of winter grazing programs. While this percent increase looks incredibly high, it is really just a return to normal, after the huge drop last winter.

 

It is also interesting to look at Kentucky beef cattle numbers as compared to the national average. USDA estimated Kentucky beef cow inventory down 1.5% from 2018, placing our cowherd at just over 1 million head. There is no question that calf prices have not encouraged expansion in Kentucky, but I really feel like weather challenges are the primary factor behind this decrease. It was a very challenging fall / early winter and we also know that things haven’t improved since January 1st. I would not be at all surprised to see more cows move if weather conditions improve and cull cow prices increase this spring.

 

Thinking ahead, I expect US beef cow inventory to remain pretty stable during 2019. Obviously, weather can completely change this and some will argue that cow-calf returns are too low and producers should be running fewer cows. I can’t argue with this logic, other than to say that producer profit perception drives inventory decisions and we are still seeing growth in a lot of major cattle producing states. Texas, Oklahoma, Nebraska, South Dakota, and Kansas, (five of the top seven cow-calf states in the US) saw increases in beef cow numbers during 2018. My guess would be that expansion will slow in these areas and some liquidation will be seen in other areas such that the size of the cowherd is roughly the same when the 2020 estimates come out.

 

The USDA report is summarized in table 1 and the full report can be accessed at: https://downloads.usda.library.cornell.edu/usda-esmis/files/h702q636h/765377121/bc386r54d/catl0219.pdf

 

Table 1: USDA January 1, 2019 Cattle Inventory Estimates