Drouth, Feed And Energy Costs
Slow U.S. Cow Herd Expansion
By Jose G. Peña,
Extension Economist
The U.S. cattle inventory increased slightly for the third year in a row, up 301,000 head (.3 percent) from last year and up 2.2 percent from January 1, 2004 when the herd rebuilding cycle began. The inventory remains 6.3 percent below the 103.5 million head previous cyclical peak on January 1, 1996.
According to USDA's February 2 Cattle Report, all cattle and calves in the U.S. as of January 1 totaled 97 million head, up just slightly from 96.7 million on January 1, 2006 and up 1.6 percent from 95.438 million head on January 1, 2005.
Beef Herd Down
While the report showed a slight increase in the size of the total cattle herd, the actual size of the beef herd, especially the inventory of the beef breeding herd, including beef cows, heifers for beef cow replacements and beef heifers expected to calve in 2007, decreased by close to 200,000 head.
In addition, the inventory of other heifers (heifers on pastures bound for feedlots) increased 94,000 head from an inventory of 9.8 million head on January 1, 2006. This increase, plus the increase in the dairy herd and the large number of cattle on feed, account for most of the total January 1 inventory increase.
It appears that last year's dry weather, high corn prices and high energy costs have had enough of a significant impact to stop the growth of the U.S. beef cattle herd. While moisture conditions have improved in major parts of the West and the in southern Plains, longer term weather forecasts form the National Weather Service suggest a return of drouth conditions this summer. Grass, hay and feed grains could remain expensive this year. This area accounts for approximately 60 percent of the U.S. cattle herd.
Prices Down
After record high prices for most beef cattle categories during winter '05-'06, prices have weakened as the drouth intensified and corn prices increased. While calf prices have weakened from last winter's record highs and input costs, i.e., feed and energy, are up, prices for calves remain relatively attractive. This indicates that weather and feed costs will be the key determinants of the future direction of the size of the U.S. cattle herd.
Ethanol
The continuing surge in corn demand for ethanol production has and will continue to have a significant widespread impact on U.S. agriculture, especially livestock agriculture as feed costs increase. This summer's boom in ethanol plant development was influenced by high energy costs. Use for ethanol production has more than doubled since 2002 and is now expected to consume about 2.15 billion bushels of corn, or about 20.4 percent of this season's entire U.S. corn crop.
Plan for High Feed Costs
Keep in mind that increased demand, not a short crop, has resulted in sharply higher prices for corn. Demand-driven corn prices will remain high unless corn production (or supplies of adequate substitutes or imports) increases significantly. While higher prices send a market signal for increased corn production, a crop of about 12 billion bushels of corn would be needed to make feed prices more economically manageable. Even with record corn yields in 2007, we would need to harvest about 4.4 million more acres of corn than were harvested this past season to come close to this level of production.
This would mean planting about 82 million acres of corn to compensate for the historical harvested-to-planted ratio. With this past season's average yields of 149.1 bushels per acre, close to 89 million acres of corn would have to be planted. Where are these extra acres coming from?
While we expect increased corn plantings, neither of these two scenarios appear very likely. As a result, cattle producers should plan to contend with higher feed costs compared to the last few years of abundant supplies of corn and relatively inexpensive feed costs.
Calf Crop Down
The 2006 calf crop was estimated at 37.567 million head, down very slightly (.02 percent) from 37.575 million calves born in 2005 and down .2 percent from a calf crop of 37.505 million head in 2004. Calves born during the first half of the year (spring 2007 feeder calf crop) were estimated at 27.4 million, up just slightly from 2005.
Feedlots Full
Meanwhile, feedlots appear behind in marketing, though this past month's winter storms have decreased productivity. According to USDA's January 26 cattle on feed report, cattle and calves on feed for slaughter in the United States for feedlots with capacity of 1000 or more head totaled 12 million head on January 1, up one percent from January 1, 2006 and six percent above January 1, 2005. This is the largest January 1 inventory since the series began in 1996.
Cattle placements in feedlots during December, however, totaled 1.71 million, nine percent below December 2005 and seven percent below December 2004.
Slow U.S. Cow Herd Expansion
By Jose G. Peña,
Extension Economist
The U.S. cattle inventory increased slightly for the third year in a row, up 301,000 head (.3 percent) from last year and up 2.2 percent from January 1, 2004 when the herd rebuilding cycle began. The inventory remains 6.3 percent below the 103.5 million head previous cyclical peak on January 1, 1996.
According to USDA's February 2 Cattle Report, all cattle and calves in the U.S. as of January 1 totaled 97 million head, up just slightly from 96.7 million on January 1, 2006 and up 1.6 percent from 95.438 million head on January 1, 2005.
Beef Herd Down
While the report showed a slight increase in the size of the total cattle herd, the actual size of the beef herd, especially the inventory of the beef breeding herd, including beef cows, heifers for beef cow replacements and beef heifers expected to calve in 2007, decreased by close to 200,000 head.
In addition, the inventory of other heifers (heifers on pastures bound for feedlots) increased 94,000 head from an inventory of 9.8 million head on January 1, 2006. This increase, plus the increase in the dairy herd and the large number of cattle on feed, account for most of the total January 1 inventory increase.
It appears that last year's dry weather, high corn prices and high energy costs have had enough of a significant impact to stop the growth of the U.S. beef cattle herd. While moisture conditions have improved in major parts of the West and the in southern Plains, longer term weather forecasts form the National Weather Service suggest a return of drouth conditions this summer. Grass, hay and feed grains could remain expensive this year. This area accounts for approximately 60 percent of the U.S. cattle herd.
Prices Down
After record high prices for most beef cattle categories during winter '05-'06, prices have weakened as the drouth intensified and corn prices increased. While calf prices have weakened from last winter's record highs and input costs, i.e., feed and energy, are up, prices for calves remain relatively attractive. This indicates that weather and feed costs will be the key determinants of the future direction of the size of the U.S. cattle herd.
Ethanol
The continuing surge in corn demand for ethanol production has and will continue to have a significant widespread impact on U.S. agriculture, especially livestock agriculture as feed costs increase. This summer's boom in ethanol plant development was influenced by high energy costs. Use for ethanol production has more than doubled since 2002 and is now expected to consume about 2.15 billion bushels of corn, or about 20.4 percent of this season's entire U.S. corn crop.
Plan for High Feed Costs
Keep in mind that increased demand, not a short crop, has resulted in sharply higher prices for corn. Demand-driven corn prices will remain high unless corn production (or supplies of adequate substitutes or imports) increases significantly. While higher prices send a market signal for increased corn production, a crop of about 12 billion bushels of corn would be needed to make feed prices more economically manageable. Even with record corn yields in 2007, we would need to harvest about 4.4 million more acres of corn than were harvested this past season to come close to this level of production.
This would mean planting about 82 million acres of corn to compensate for the historical harvested-to-planted ratio. With this past season's average yields of 149.1 bushels per acre, close to 89 million acres of corn would have to be planted. Where are these extra acres coming from?
While we expect increased corn plantings, neither of these two scenarios appear very likely. As a result, cattle producers should plan to contend with higher feed costs compared to the last few years of abundant supplies of corn and relatively inexpensive feed costs.
Calf Crop Down
The 2006 calf crop was estimated at 37.567 million head, down very slightly (.02 percent) from 37.575 million calves born in 2005 and down .2 percent from a calf crop of 37.505 million head in 2004. Calves born during the first half of the year (spring 2007 feeder calf crop) were estimated at 27.4 million, up just slightly from 2005.
Feedlots Full
Meanwhile, feedlots appear behind in marketing, though this past month's winter storms have decreased productivity. According to USDA's January 26 cattle on feed report, cattle and calves on feed for slaughter in the United States for feedlots with capacity of 1000 or more head totaled 12 million head on January 1, up one percent from January 1, 2006 and six percent above January 1, 2005. This is the largest January 1 inventory since the series began in 1996.
Cattle placements in feedlots during December, however, totaled 1.71 million, nine percent below December 2005 and seven percent below December 2004.
