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Drought might end further expansion

Prime Cuts with Steve Kay

Beef cattle producers in North America largely owe their livelihoods to a simple but precious crop — grass. The more they have, the more they expand their herds because no producer can bear to see pasture being underutilized. The less they have, the more likely they are to cut their numbers. Producers in the U.S. well know how drought can cause the latter to occur, drastically as it turns out in recent years.

It’s with some concern therefore that drought conditions have worsened in the past month in several parts of the U.S. Extreme drought now extends through much of the Texas Panhandle into southern Kansas, with pockets also in Arizona and other places. Severe drought extends from the Colorado Rockies to the Mississippi River and south to the Florida Panhandle, and is also in parts of Montana and South Dakota.

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Should these conditions persist, it is possible that four years of U.S. cattle herd expansion might come to an end. The total herd expanded again in 2017 but at a slightly slower rate than expected. The all cattle and calves total on January 1 was 94.399 million head, up 694,000 head or 0.7 per cent. Beef cow numbers totaled 31.723 million head, up 510,000 head or 1.6 per cent from last year. The 2017 calf crop totaled 35.808 million head, up 715,000 head or 2.0 per cent from last year. Analysts had forecast that the total inventory would be up 1.3 per cent. But a dive into the numbers revealed that USDA upwardly revised its January 1, 2017, total by 120,000 head.

On a state basis, the most startling growth in 2017 came in South Dakota’s beef cow numbers, which increased 8.2 per cent. Texas continues to have by far the largest cattle population of any state. Its January 1 total was 12.500 million head, up 200,000 head from a year earlier. Nebraska is number two with 6.800 million head, up 350,000 head, and Kansas is number three with 6.300 million head, down 100,000 head. Texas also heads the states with the most beef cows. It had 4.585 million head on January 1, up 25,000 head from a year ago. Missouri was second with 2.166 million head, up 111,000 head, Oklahoma was third with 2.131 million head, up 36,000 head, Nebraska was fourth with 1.910 million head, down 10,000 head, and South Dakota was fifth with 1.801 million head, up 137,000 head. Kansas saw its beef cow numbers decline by 63,000 head to 1.507 million head.

South Dakota also added 40,000 beef cow replacements in 2017, more than any other state. A year-to-year increase in its calf crop of 150,000 head was also larger than in any other state. The surge in its beef cow, beef replacement number and calf crop reflects the reopening of a beef processing plant in Aberdeen and the movement of cattle from Montana because of drought (as noted above). The state’s January 1, 2018 cattle-on-feed total of 430,000 head was up 50,000 head or 13.2 per cent from a year earlier, suggesting the plant is also encouraging more cattle to be finished within the state.

The surprise in the report was the feeder cattle and calf supply outside feedlots, says analyst Andrew Gottschalk of HedgersEdge.com. He calculates this number to be down 608,000 head from January 1, 2017. While a reduction was not unexpected, the magnitude of the decline is a shocker. The reduction should lend support to the fed cattle sector during the fourth quarter. As for continued herd expansion, female slaughter increased in 2017 but remains well below liquidation levels, notes Gottschalk.

About the author

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A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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