Yesterday, the National Agricultural Statistics Service (NASS) released the biannual Cattle inventory report. This report provides a review of the changes in cattle inventory over the last year. Using the Cattle report, we can glean insight into the expected cattle supply and resulting beef supply in the near future. These supplies also inform our longer-term cattle and beef price expectations.
The last two January reports indicated that the number of beef cows that calved declined approximately 1.6% and 1.1% in 2021 and 2020, respectively. Declines in the number of cows are followed by a decline in the number of calves and, finally, a lower beef supply; one less cow calving in spring 2020 means one less live calf placed on feed in the fall of 2020, and subsequently, there is one less fed calf available for processing in summer 2021. Lower supplies, all else equal, mean higher prices.
Since 1990, in years when the cowherd shrank year to year the average decline in all cattle and calves was 1.2%. Yesterday’s inventory report indicated a 2% decline in all cattle and calves (from 93.8 million head to 91.9 million head), a 2.4% decline (from 30.8 million head to 30.1 million head) in the beef cow herd, and a 1% decline (from 35.5 million head to 35.1 million head) in the calf crop from 2020 to 2021. The larger drop in inventory than recent historical averages was likely a result of persistent drought across much of the western U.S. In fact, the average change in inventory in states to the west of the line including Texas to North Dakota was a loss of 2.7%, whereas the average change in inventory to the east of that line was a loss of 1.9%. A final interesting point: the number of heifers expected to calve in the upcoming year declined 3% year over year, suggesting a continued contraction in the cattle herd over the next year. The contraction in the cattle herd will support higher prices in the next year, all else equal.