The August Livestock, Dairy and Poultry Outlook report from USDA, released August 18, examines somewhat conflicting numbers regarding heifer retention, and shows U.S. beef imports and exports running well above last-year’s levels.

The report notes that the July 1 cattle-inventory report showed little or no increase in replacement heifer inventories for either beef or dairy herds over those of two years ago, on July 1, 2012. In 2013, USDA did not issue a mid-year inventory report due to the “sequestration” that temporarily suspended spending for numerous government programs. The numbers could indicate ranchers have not yet begun moving toward an expansion phase, in contrast with widespread assumptions that this year’s improved forage conditions and record-high calf prices would trigger more heifer retention.

But, lacking a July 2013 report, the comparisons with two years ago could mask some more recent trends. Comparisons with numbers from the most-recent report, issued on January 1, 2014, also would be misleading due to seasonal shifts in populations of various classes of cattle, such as female calves in July being classified as replacement heifers the following January, or beef-cow numbers dropping between July and January due to late-summer and fall culling of open cows. However, the January 2014 inventory report showed a 2 percent increase in beef replacement heifers compared with January 1, 2013, and almost a 4 percent increase since January 1, 2012, suggesting some rebuilding in herds in areas where weather and forage supplies allow.

This year’s Cattle on Feed reports also have suggested producers are retaining a few more heifers for breeding. The July 2014 report for example, also released on Friday, July 25, showed an overall reduction in feedyard inventories of 2 percent compared with a year ago. Steers in feedyards were down 1 percent, while heifers were down by 5 percent. Likewise, the January 2014 Cattle on Feed report showed a 5 percent year-to-year reduction in feedyard inventories, with a 4 percent reduction in steers and an 8 percent reduction in heifers on feed. The proportion of heifers on feed is the lowest since July 2006, during the last upturn in total

cow inventories according to USDA.

These figures suggest a modest increase in the number of heifers going back into breeding herds rather than shipping to the feedyard. Although the report shows the number of beef replacement heifers down 2 percent from that of July 2012, it seems likely the next Cattle report, in January 2015, will again show a small increase in replacement-heifer numbers.

Other key points from the report include:

  • The U.S. Drought Monitor from August 8, 2014 indicates relief for parts of the West, Southwest, and Plains; however, California and some areas of the Southwest are still impacted by significant areas of Exceptional drought.
  • Even with corn prices dropping below $4 per bushel, feeding margins will be pressured by the high price of feeder cattle, which currently are running above $200 per hundredweight.  
  • Only once since 1999 has the July 1 inventory of all cattle on feed been as low as the 11.6 million head on July 1, 2014.
  • The recent disproportionately large placements of over-800-pound feeder cattle in feedlots suggests more lighter calves have been channeled through backgrounding and stocker operations this summer.
  • Assuming ranchers do begin retaining more heifers, supplies of feeder cattle will shrink even further. This-year’s heifer calves will not be bred until next summer, so it will be spring of 2016 before they calve, and 2017 before most of those calves will be placed on feed and marketed as fed cattle. It will take several years of heifer retention to build breeding herds to the point of significantly expanding beef supplies.
  • Short supplies and high prices could encourage cattle feeders to place cattle on feed at younger ages and at lighter weights in an effort to increase short-term beef supplies. At the same time, lower corn prices provide further incentive to feed cattle longer and market them at heavier weights.
  • Two packing plants, L&H Packing Co. in San Antonio, Texas and Cargill Inc. in Milwaukee, Wisconsin, recently announced plans to close due to low cattle inventories. These follow earlier closings in of a Cargill plant in Plainview, Texas and a National Beef plant in Brawley,
  • California.
  • At $5.94 and $5.51 per pound, retail Choice beef and All-fresh beef prices moved deeper into record territory in June.
  • U.S. cattle imports were up 9 percent through June 2014 compared with year-earlier Levels, particularly from Canada. Cattle prices are high in Canada, but with U.S. demand high and the U.S. dollar strengthening, Canadian sellers can get better prices here.
  • U.S. beef imports through June 2014 were up 12 percent, led by stronger imports from Australia, up 36 percent, Canada, up 11 percent and New Zealand, up 3 percent. Drought-induced liquidation in Australia has increased beef slaughter there, and the U.S. needs more lean manufacturing beef as cow and bull slaughter have declined 12 percent year to date.
  • Through June 2014, U.S. beef exports have increased 5 percent, led by higher shipments to Hong Kong, up 57 percent, Mexico, up 33 percent and South Korea, up 21 percent.
  • Projected record corn yields led to a record U.S. production forecast of 14.0 billion bushels and a 2014 - 2015 corn price forecast of $3.55-$4.25 per bushel.

View the full report from USDA.