Beef Cattle Expansion Not Expected in Short Term

Beef Cattle Expansion Not Expected in Short Term

Poor returns delay and dampen expansion phase of cattle cycle.

USDA's annual January Cattle report estimated that the number of cattle and calves declined about 1%, to 93.7 million head on Jan. 1, 2010.


"The current cattle cycle had a short three year expansion from 2005 to 2007. The total inventory has since declined for three years," Joel Greene, Economist with USDA's World Ag Outlook Board, told participants at USDA's annual Outlook Forum in Washington Friday.


The beef cow herd was estimated at 31.4 million head, down more than 1% from a year earlier, and is the smallest beef cow herd since 1963. Beef cow slaughter declined in 2009 but was still relatively high. The 2009 calf crop was estimated at 35.8 million head, the smallest calf crop since 1951.


Cowherd to keep shrinking. Greene does not expect the U.S. cattle inventory to expand during 2010. The cow herd will continue to decline as total commercial cow slaughter is expected to remain above 6 million head for a third straight year.


The Cattle report estimated that producers retained about the same number of heifers, with a lower number of beef replacement heifers offset by a higher number of dairy heifers. The 2010 calf crop is expected to decline slightly.


"With nearly 50 and 60 year lows for the beef cowherd and calf crop, herd expansion and consequently rising beef production will be a gradual process," says Greene. "A potential rebound in beef output is not likely until 2013."


Price prospects.  USDA forecasts the Choice Nebraska steer price for 2010 to average $85 to $91 per cwt. In 2009, the steer price averaged $82.68 per cwt, the lowest price since 2002.


"Weak demand for beef was reflected in Choice wholesale and retail beef prices last year as both declined from the previous year," says Greene. The wholesale Choice beef cutout value averaged about $141 per cwt last year compared with a $153 per cwt average for 2008. Through early February 2010 wholesale Choice beef values have averaged about $3 per cwt below a year ago.


"So far this year estimated packer margins have remained mostly positive which has helped support cattle prices above year earlier levels," says Green. "Severe winter weather has also disrupted cattle markets. But reduced fed cattle supplies are expected to keep prices higher during each quarter of the year."


Retail beef prices in 2010 are expected to be slightly above the 2009 average of $4.26 per pound.

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