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U.S. Beef Cattle Herd Continues Contracting

The recent Cattle on Feed Report showed the American beef herd continues to shrink. Kevin Good, vice president of industry relations for CattleFax, says the lower numbers continue a long-term trend.

“The cattle on feed number was down two percent compared to a year ago, placements in the month of August were down five (percent), marketings down six percent, and all those were in line with the trade guesses going in,” says Good. “I think we need to recognize that we’ve been liquidating that beef cow herd in the U.S. for four-and-a-half-years-plus and because of that, you’ve got smaller feeder cattle and calf supply outside to place, and the trend should remain intact probably for at least another one or two years that we’re looking at tighter supplies.”

He says persistent drought is the main reason for contraction in the U.S. cattle herd. Good says, “Drought is the number one factor. We’ve had higher cattle prices for the last 18 months, enough so that it should have incentivized expansion, but you have to have feed, and unfortunately, we were in the midst of a three-year drought. We broke that cycle earlier in this year, but the dry conditions have returned, particularly in the state of Texas, and that’s a huge cow state. That’s 15 percent of your beef cow herd there. You’ve got some dry pockets in Kansas, Nebraska, and Missouri. All those are big cow states. So really, drought is the number one factor that caused the liquidation to continue longer than you would have thought looking at prices.”

The beef industry is also facing other challenges according to Good. “Obviously, you’ve got other headwinds. I mean, think about the cost of capital, of money, interest rates, availability of labor, cost of labor, urban sprawl, some of those things that are major headwinds, and the age of the producer that we didn’t have one and two cycles ago.”

Good talks about signs that will show the herd has begun expanding.

“You’re starting to see the signs of that, particularly in northern plains and the west, where you’ve had better moisture conditions,” says Good. “You’re starting to see more of those females stay, and the heifers first, so you are at the first stage of that. Unfortunately, you just need to have a bigger percentage of the U.S. that gets in better shape moisture-wise before we can turn the whole ship around. But there are, geographically, some areas that are already starting to expand just because they’ve got that combination of a strong calf market and adequate feed supplies.”

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