Semiannual Cattle Inventory and Cattle Contract Library Set the Tone for the 2023 Marketing Year

By Bernt Nelson

Jan. 31 proved to be an important day for cattle producers as the cattle contract library pilot website went live on the same day USDA released its semiannual cattle inventory report. Each of these provides important market information that can help cattle producers in 2023 and sets the tone for the cattle market in 2023 and beyond. This Market Intel will provide background and analysis of the inventory report and the new pilot program.

USDA Semiannual Inventory Report

USDA’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 calf crop for the current year.

The story of the current cattle inventory has been building throughout the last year. Cattle producers were facing headwinds from high input costs, inflation and three consecutive years of drought in some of the most cattle-dense regions of the United States. Many opted to liquidate cattle, primarily replacement heifers, that would normally be kept and used to build herd numbers.

At first glance the overall numbers do not seem like big market movers. To really understand the implications of this report we need to break down beef cattle (Figure 2). The inventory of all U.S. beef cows on Jan. 1, 2023, was 28.9 million, down 4% or 1.16 million head from Jan. 1, 2022. 

Cattle Contract Library

Jan. 31 also marked the unveiling of the new website for USDA’s cattle contract library. The Cattle Contracts Library Pilot Program, established by USDA’s Agricultural Marketing Service (AMS) under the Consolidated Appropriations Act of 2022, went into effect on Jan. 6, 2023. This program is designed to increase market transparency for cattle producers by establishing a cattle contract library similar to USDA’s Swine Contract Library maintained pursuant to sec. 222 of the Packers and Stockyards Act (7 U.S.C 198a).

As of Jan. 6, packers who slaughter 5% or more of the total fed cattle slaughtered in the previous five years, must submit contract information for each active contract, oral or written, and every new active contract. 

What does it all mean?

This report is bullish. The cattle inventory is down in every category of beef cattle, with the greatest declines coming from beef replacement heifers that are responsible for next year’s calf crop. The latest Cattle on Feed report estimated that heifers on feed represent 40% of all cattle on feed -- the highest percentage of heifers on feed since 2002. The declining inventory of beef heifers is a clear indicator that beef production will decline in 2023, 2024, and maybe even farther.