US Cattle Inventory Plateaus, Suggesting Continued Market Stability Contingent on Strong Demand

US Cattle Inventory Plateaus, Suggesting Continued Market Stability Contingent on Strong Demand
Jul 24, 2019

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The July Cattle report released last Friday by the United States Department of Agriculture shows that the inventory of all cattle and calves in the U.S. was unchanged year over year at 103 million head as of July 1. The inventory of beef cows was likewise unchanged at 32.4 million head while the dairy cow inventory was 9.3 million, down 1.1 percent year over year. Beef replacement heifers was down 4.3 percent at 4.4 million head and dairy replacement heifers were down 2.4 percent to 4.1 million head compared to one year ago. The inventory of bulls was unchanged year over year at 2.1 million head.

The July 1 inventory of steers over 500 pounds was 14.7 million head, up 1.4 percent year over year. The inventory of other (not for replacement) heifers over 500 pounds was 7.9 million head, up 5.3 percent from one year ago. Total steer and heifer calves under 500 pounds was 28.1 million head, down 0.7 percent year over year. With an estimated total July 1 feedlot inventory of 13.6 million head, these inventory estimates lead to an estimated feeder supply outside of feedlots of 37.1 million head, up slightly by 0.3 percent compared to last year. The inventory report, according to Oklahoma State University Extension Livestock Market Economist Dr. Derrell Peel, was well anticipated and contained no surprises. In a recent interview with Radio Oklahoma Ag Network Farm Director Ron Hays, he remarked that the stable cow and calf crop numbers in this report suggest that beef production will show little to no growth moving toward 2020. He says current production and price levels should be able to be sustained until there is a change in the market that provokes a new direction in cattle inventories.

“I think that’s what’s different about this cycle compared to cycles historically,” he said. “Normally, the cattle industry has expanded to the point where it was too much and then we would be forced into some sort of liquidation phase in terms of numbers and driven by prices dropping significantly. I don’t think we’re set up that way at this point.

“So, depending on demand which is the key going forward, we can sustain and maintain the levels that we are at in a noncyclical way at this plateau level.”

If something should happen to weaken beef demand in the U.S. or in global markets, lower beef and cattle prices could result in some liquidation of cattle inventories. Impressive beef demand since 2017 is showing some signs of weakness that should be closely monitored going forward. Conversely, new growth in demand, most likely to occur if the myriad of trade disputes and issues in which the U.S. is currently embroiled are resolved, could provoke additional herd expansion and new growth in beef and cattle markets at some point.

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