Market Advisor: Weather Continues to Restrict Cattle Cycle Expansion
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Tim Petry, Livestock Marketing Economist
NDSU Extension Service
The USDA National Agricultural Statistics Service (NASS) July 1 cattle
report
(issued on July 20) confirmed that the normal cattle cycle buildup has
continued
to be stalled by adverse weather conditions.
All cattle and calves in the U.S. on July 1 totaled 104.8 million head, down
400,000 head from the 105.2 million of last year, but still above the 104.2
million recorded in 2005.
Beef cows that have calved, at 33.4 million head, are down slightly from the
33.45 million reported in 2005 and 2006.
Feeder calf prices have been high enough the last several years to stimulate
beef cattle herd expansion, but adverse weather conditions have prevented
it
from happening.
Last year, extremely dry conditions in the southern and northern Plains
caused
herd liquidations in parts of those areas. Much of the southern Plains has
received ample rainfall this year. The northern Plains also returned to
average
moisture in much of the area, although parts of North and South Dakota and
Nebraska still remain dry.
Interestingly, parts of North Dakota were under some degree of drought for
78
consecutive months from December 2000 to June 2007, according to Adnan
Akyuz,
North Dakota state climatologist. The most severe drought conditions
occurred
during the third week of July 2006. At that time, 100 percent of the state was
experiencing at least moderate drought status as recorded by the weekly
U.S.
Drought Monitor (http://drought.unl.edu/dm/monitor.html). After having no
drought status in June, much of southwestern North Dakota again is
recorded as
abnormally dry.
The major drought areas in 2007 are in the southeastern and western U.S.
In
those areas, beef cow herd liquidation has occurred. U.S. beef cow
slaughter
averaged 11.6 percent higher than last year in the first half of 2007, but was
below July of last year. 2006 beef cow slaughter was more than 18 percent
higher
than in 2005.
The NASS report also showed a 6 percent reduction in heifers retained for
replacement compared with last year. There is interest in herd rebuilding in
areas that have improved moisture conditions, so more heifers from the
2007 calf
crop may be retained.
NASS also released a joint U.S and Canadian cattle inventory report on Aug.
16.
The report showed that the Canadian cattle herd also declined. All cattle and
calves in Canada as of July 1 totaled 15.9 million head, down 1 percent from
the
16 million in 2006 and 6 percent below the 16.9 million of two years ago.
Beef cows that have calved in Canada declined 1 percent in 2007 and were
down 6
percent from the peak numbers that occurred in 2005. The 2007 U.S. calf
crop was
estimated at 37.4 million head, down 167,000 head from last year. However,
the
supply of feeder cattle outside feedlots was up about 100,000 on July 1
because
calves have been staying on pasture longer this year because of the higher
corn
prices and feedlot costs of gain. There also is improved moisture in much of
the
Plains.
The NASS cattle-on-feed report released on Aug. 17 showed a 5 percent
decline in
cattle on feed on Aug. 1, compared with a year ago.
Placements into feedlots during July totaled 1.62 million head, 17 percent
below
2006 and 3 percent below 2005. This is the lowest placement figure for July
since the series began in 1996.
Placements of cattle less than 700 pounds were down 31 percent, while
placements
of more than 700 pounds were down only 3.5 percent.
The number of cattle on feed in the southern Plains (Kansas, Oklahoma and
Texas)
feedlots declined 490,000 head, while the number on feed in the northern
Plains
(Iowa, Nebraska and South Dakota) increased 25,000 head. This reflects
the
cheaper cost of corn and the increasing availability of ethanol feed
byproducts
in the northern Plains.
The shorter supply of cattle will be supportive to prices in 2007 and 2008.
Feeder-calf prices are near last year's levels in spite of higher corn prices
and will be the subject of a future Market Advisor column. Fed-steer prices
are
about $5 per hundredweight higher than last year due to the expanding
export
markets for beef. Cow prices also are above the levels of a year ago, even
though cow slaughter is up. A strong domestic demand for hamburger is
supporting
prices.
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Tim Petry, Livestock Marketing Economist
NDSU Extension Service
The USDA National Agricultural Statistics Service (NASS) July 1 cattle
report
(issued on July 20) confirmed that the normal cattle cycle buildup has
continued
to be stalled by adverse weather conditions.
All cattle and calves in the U.S. on July 1 totaled 104.8 million head, down
400,000 head from the 105.2 million of last year, but still above the 104.2
million recorded in 2005.
Beef cows that have calved, at 33.4 million head, are down slightly from the
33.45 million reported in 2005 and 2006.
Feeder calf prices have been high enough the last several years to stimulate
beef cattle herd expansion, but adverse weather conditions have prevented
it
from happening.
Last year, extremely dry conditions in the southern and northern Plains
caused
herd liquidations in parts of those areas. Much of the southern Plains has
received ample rainfall this year. The northern Plains also returned to
average
moisture in much of the area, although parts of North and South Dakota and
Nebraska still remain dry.
Interestingly, parts of North Dakota were under some degree of drought for
78
consecutive months from December 2000 to June 2007, according to Adnan
Akyuz,
North Dakota state climatologist. The most severe drought conditions
occurred
during the third week of July 2006. At that time, 100 percent of the state was
experiencing at least moderate drought status as recorded by the weekly
U.S.
Drought Monitor (http://drought.unl.edu/dm/monitor.html). After having no
drought status in June, much of southwestern North Dakota again is
recorded as
abnormally dry.
The major drought areas in 2007 are in the southeastern and western U.S.
In
those areas, beef cow herd liquidation has occurred. U.S. beef cow
slaughter
averaged 11.6 percent higher than last year in the first half of 2007, but was
below July of last year. 2006 beef cow slaughter was more than 18 percent
higher
than in 2005.
The NASS report also showed a 6 percent reduction in heifers retained for
replacement compared with last year. There is interest in herd rebuilding in
areas that have improved moisture conditions, so more heifers from the
2007 calf
crop may be retained.
NASS also released a joint U.S and Canadian cattle inventory report on Aug.
16.
The report showed that the Canadian cattle herd also declined. All cattle and
calves in Canada as of July 1 totaled 15.9 million head, down 1 percent from
the
16 million in 2006 and 6 percent below the 16.9 million of two years ago.
Beef cows that have calved in Canada declined 1 percent in 2007 and were
down 6
percent from the peak numbers that occurred in 2005. The 2007 U.S. calf
crop was
estimated at 37.4 million head, down 167,000 head from last year. However,
the
supply of feeder cattle outside feedlots was up about 100,000 on July 1
because
calves have been staying on pasture longer this year because of the higher
corn
prices and feedlot costs of gain. There also is improved moisture in much of
the
Plains.
The NASS cattle-on-feed report released on Aug. 17 showed a 5 percent
decline in
cattle on feed on Aug. 1, compared with a year ago.
Placements into feedlots during July totaled 1.62 million head, 17 percent
below
2006 and 3 percent below 2005. This is the lowest placement figure for July
since the series began in 1996.
Placements of cattle less than 700 pounds were down 31 percent, while
placements
of more than 700 pounds were down only 3.5 percent.
The number of cattle on feed in the southern Plains (Kansas, Oklahoma and
Texas)
feedlots declined 490,000 head, while the number on feed in the northern
Plains
(Iowa, Nebraska and South Dakota) increased 25,000 head. This reflects
the
cheaper cost of corn and the increasing availability of ethanol feed
byproducts
in the northern Plains.
The shorter supply of cattle will be supportive to prices in 2007 and 2008.
Feeder-calf prices are near last year's levels in spite of higher corn prices
and will be the subject of a future Market Advisor column. Fed-steer prices
are
about $5 per hundredweight higher than last year due to the expanding
export
markets for beef. Cow prices also are above the levels of a year ago, even
though cow slaughter is up. A strong domestic demand for hamburger is
supporting
prices.