The annual USDA Cattle inventory report is just around the corner and the Livestock Marketing Information Center is always good about giving us a preview of what the national inventory report should be. According to their pre-report information, we have seen the end of the expansion cycle in beef cattle and dairy cattle too.
The market always dictates the cattle cycle. When production costs become greater than market values, we tend to see changes in the nation’s cow herd. Grass availability and Mother Nature have a great hand in the size of the nation’s cow herd, but economics is the greatest influencer.
Beef heifers for replacement cows is always an indicator of growth. In 2014 the national beef cow herd was at its lowest because of widespread drought. The cow herd was 28.956 million head, the lowest in recorded history. In 2015 the number of replacement heifers placed in the national cow herd grew rapidly. Producers placed roughly 6.1 million heifers in 2016 and 2017. Cattlemen added 6.3 million bred heifers back into the national cow herd in 2018, which brought the cow herd to 31,766 by the end of 2019. Last year, 2019, marked the decline of the rapid growth with 5.9 million heifers going back into the herd. As many of you remember, the bred heifer market was quite a bit softer this last fall.
Between U.S. beef cattlemen and the dairy industry, we grew the total of all cattle and calves from 88 million to almost 93 million head in just five years. U.S. agriculture responds well to the free market and profit signals. Give us $3 calves and you will have plenty of them. No doubt cattle prices went from historic highs to lower, as numbers grew. However, retail prices for beef remained about the same over that time.
What cattle feeders want to know is how big the calf crop is going to be. We went from an annual calf crop of 33.522 million calves in 2014, to 36.221 million head in just five short years. Then we found parity in the cattle business; raising calves for a profit became more difficult. Then we started the liquidation part of the cattle cycle, which we’re currently in.
Then we have cow slaughter. In 2016 we slaughtered 2.54 million head of beef cows and in 2019 we processed almost 3.19 million beef cows. Cull cow slaughter is typically 15 percent of ranch revenue. When the big drought started in 2013-14, cattlemen sent lots of cows to town, a million more than normal. Then we started rebuilding herds with the better genetics. Genetic companies came out with better tools to tell cattlemen more about their genetic goals.
Today we are producing more high-quality beef than ever. In 2010, 55 percent Choice in the national slaughter mix was as good as it got; 4 percent Prime was a homerun. The genetic turnover in just five short years was remarkable. The industry consistently produced 85 percent Choice and 6 percent Prime beef. As a result, we have created greater demand for our product.
Even though cattle numbers are high, I feel there is still great demand for our beef. Many of the trade agreements just accomplished will influence our export traffic. These are all growth signals for the beef industry, as well as all meat protein industries.
The signs to look for would be any major changes in the packing industry or further processors gearing up to fill Chinese supply chains. The packing industry is almost at maximum capacity and if JBS or Tyson start making significant changes, or some of the large feeding companies move away from feeding ractopamine, in a big way, I would expect they are getting ready to fulfill beef orders to China.
The speculation is that China will start with buying cow beef since those carcasses fulfill most of their food safety issues—no implants or ractopamine would have been used on that class of cattle. Changes to fulfill these new, expanded markets will take some time, but I would expect to see shifts to those markets slowly.
I’m excited about the cattle and beef industry going forward. The fake meat guys think they have us nervous, but I wouldn’t think twice about them. I understand that Burger King has already placed the Impossible Burger on the “2 for $6” menu, which says a lot about their sales. Markets speak volumes and the markets for fresh, safe, meat products are good worldwide. — PETE CROW