NEW ORLEANS, La. — The U.S. cow herd expansion is slowing, but a healthy economy and growing exports keep demand strong.
There is a record amount of beef, pork and poultry that relies on exports to chew through. The American population is growing at a rate of less than one percent and even though per capita meat consumption is at 217 pounds, up from 199 lb. in 2014, other customers beyond U.S. borders are required to consume the rest.
“One of the things we were concerned about last year was can we keep export markets strong and can we keep domestic demand strong. Things worked in our favour,” said Randy Blach, CEO of the market analysis firm Cattlefax.
The industry has had a good run for the last three to four years, said Cattlefax market analyst Kevin Good. The U.S. beef cow inventory is at 31. 9 million head and the herd is considered at a stable phase in the cattle cycle
The herd is likely to increase slightly this year with peak numbers expected in 2020-21. Weather and profitability across all parts of the industry have driven expansion, Good said at the National Cattlemen’s Beef Association convention held in New Orleans this week.
Last year a large number of cows were culled and slaughtered. That posed a logistical challenge for slaughter facilities working at full capacity that stretches to six day work weeks. More dairy cows have been killed as well due to low milk prices, further pressuring packing plants to handle the extra inventory. At the same time, butcher cow prices have been disappointing.
Total slaughter last year was 33.5 million head, up 1.4 percent from 2017.
Feedlots are also at capacity. Just over 35 percent of those placements were heifers. If that ratio reaches 37 percent, liquidation is indicated.
Fourth quarter 2018 feedlot placements were down due to muddy conditions and other factors. Animals that would have been placed earlier may show up in the spring.
Carcass weights are down partly because of cold and wet feeding conditions in the major feeding states. Those could change in the second half of the year when cattle will gain better during milder weather.
The U.S. has become a net beef exporter, and fewer imports have landed. With more cows going to market, there is less demand for grinding meat from Australia and New Zealand.
Total meat exports of beef, pork and poultry totalled 16.6 billion pounds last year.
Exports have been good to the industry because $360 per head is derived from exports.
“We recognize if we don’t get the trade deals done, if we don’t have open access, those are risk factors the industry has to address,” said Good.
The cattle industry will remain profitable, but there is a cyclical price risk moving into the early 2020s.
There could be erosion in calf prices, but cow-calf operators can expect to remain profitable with no major liquidation phase expected for the next couple years.
The market picture has shifted.
“In the days when the markets were pretty tame, we would have the fed cattle market move about $12 per hundredweight plus or minus $6 around the annual average. Today our market moves $30 per cwt. plus or minus $15 around the annual average. The same thing is seen in our calf and feeder markets,” said Blach.
Average U.S. prices for 2019 are fed cattle, $117 cwt; 750 lb. feeder, $147 per cwt.; 550 lb. calf, $165 per cwt.; cows, $55 per cwt.; bred cows, $1,500.
Good predicts that market highs will come in March or April, but prices in the second half of the year are expected to drop. Cow prices are not expected to strengthen. They have fallen nine percent over the annual average.