USDA’s annual cattle inventory report out Jan. 24 revealed one-fifth year of U.S. herd liquidation in 2023. The Jan. 1 total for cattle and calves was an estimated 87.157 million head, which was down 1.9% or 1.684 million head from a year earlier. This meant the total declined by 7.648 million head after it peaked in the latest cattle cycle at 94.805 million head on Jan. 1, 2019. That peak came after five years of expansion, which indicates that the current cycle is conforming to its historic patterns.
The five years of liquidation were caused by numerous factors ranging from widespread drought to soaring input costs, especially the high cost of borrowing money to buy heifers for herd rebuilding. The big question now is: What will it take for rebuilding to start either this year or next?
Analysts say the rate of herd liquidation is likely to slow this year because of improved moisture conditions over much of cattle-grazing country. But herd rebuilding might not begin this year and feeder cattle supplies will be smaller because of last year’s near record cow and heifer slaughter levels. Another factor will be that USDA estimates the 2024 calf crop will total 33.593 million head, down 847,000 head on last year’s crop. The beef cow herd on Jan. 1 totaled 28.223 million head, down 716,000 head or 2.5% on last year’s 28.939 million head. Beef cow replacements on Jan. 1 totaled 4.853 million head, down 1.6%, and dairy cow and replacement numbers were each down 0.4%.
Heifer and beef cow slaughter as a percent of total cattle slaughter under federal inspection was 42.1% in 2023, says USDA’s Economic Research Service (ERS) in its latest Livestock, Dairy and Poultry Outlook. This was the second highest average weekly percentage since USDA’s data series began in 1986 and was just behind the record set in 2022 of 42.3%. The annual commercial slaughter total is not yet available but USDA’s Agricultural Marketing Service has published actual slaughter under federal inspection through the end of the year. This allows for comparison of year-to-year slaughter, says ERS.
In 2023, all classes of slaughter were down from the prior year. But the proportion of heifers and cows in the slaughter mix was higher than anticipated a year ago. The expectation was that as drought from 2020-22 receded, pasture conditions improved and calf prices rose, producers would be more willing to retain heifers and cows to maintain or expand their herds, says ERS.
ERS in the same report raised its forecast for this year’s beef production 120 million pounds from the previous month to 26.110 billion pounds. This would be a decline of just over 3% from 2023. In the first half of 2024, its production forecast was largely raised on higher anticipated fed cattle marketings based on higher-than-expected placements in November and December. In addition, relatively heavy cattle weights reported in December were carried into 2024.
ERS also adjusted its beef trade forecasts for 2024 to reflect the current pace of trade and expectations for domestic production and demand. It lowered its export forecast by 60 million pounds to 2.785 billion lbs. The decrease will be concentrated in the second half of the year when the expected decline in beef production picks up, limiting exportable supplies. Exports as a percent of production in 2024 are expected to be around 10.7%, versus an estimated 11.2% in 2022, says ERS.
Every cattle cycle presents opportunities for change, says Rabobank analyst Lance Zimmerman in a new report. The focus for U.S. producers in the next 10 years needs to be on evolving into a beef supply chain that better adapts to the uncertainty that challenges participants in a largely commodity-based business. Production and price risk management are more challenging today for producers and beef processors than in previous cycles. The beef industry needs to build resiliency throughout the supply chain with the same intensity with which it built demand over the last three decades. Operations focusing on vertical coordination, technology adoption, and policy engagement can create a more economically viable business that can better navigate the chaos of future cycles, he says. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
