U.S. Cattle Inventory Decline
Points To Better Market Ahead

By Jose G. Peña
Extension Economist

The cattle market improved significantly during the past two years after the collapse of 1996. The outlook for 1999 appears relatively bright as the size of the U.S. herd continues to decrease.

All cattle and calves in the U.S. as of January 1, 1999 totaled 98.5 million head, 1.2 percent below the 99.7 million head on January 1, 1998 and 3.1 percent below the 101.7 million head two years ago. A continuation of liquidation which began in 1996 was anticipated, however, the cattle market, especially the market for slaughter weights, slowed down last fall as a result of huge supplies of meat and a backlog of cattle on feed for slaughter.

Meat Supplies Up

According to USDA's livestock slaughter report of January 22, red meat and pork production set record highs for December 1998. Commercial red meat production for the U.S., for example, totaled 3.94 billion pounds in December, up six percent from the 3.71 billion pounds produced in December 1997 and up six percent from the previous record high for December set in 1994.

Beef production during December 1998, at 2.1 billion pounds, was four percent above the same period in 1997. Cattle slaughter during December 1998 totaled 2.9 million head, up one percent from 1997. The average liveweight during the December 1998 slaughter period was up 21 pounds from the previous year, at 1214 pounds.

Total beef, pork and poultry production for 1998 at 77.231 billion pounds (25.264 beef, 18.692 pork, 33.275 poultry) was up 2.34 billion pounds from 74.89 billion pounds produced in 1997 and is forecast to increase slightly to 77.7 billion pounds (24 beef, 19 pork, 34.7 poultry) in 1999.

Bulging supplies of meat limit the price of beef, which, in turn, caps the price for fed cattle. This may account for the sluggish market for slaughter weights during Fall/Winter 1998 and a probable slight improvement in 1999.

Placements Up

USDA's January 22, 1999 cattle on feed report (for feedlots with capacity of 1000 or more head, 61 percent of the total inventory), indicated that cattle and calves on feed for slaughter markets in the U.S. totaled 10.63 million head on January 1, down five percent from January 1, 1998, but one percent above January 1, 1997.

Placements in feedlots during December 1998 totaled 1.5 million, down four percent from December 1997 and twelve percent below December 1996.

The January 1, level of placements and especially the lower placements during December 1998 will reduce beef production at least through the first half of 1999 and may balance meat supplies with demand, especially during the high spring and early summer cook-out demand period.

Although the 1998 calf crop at 38.582 million head is down one percent from a 38.961 million head crop in 1997 and down 3.1 percent from a calf crop of 39.823 in 1996 when the current liquidation began, cattle feeder supplies appear adequate to meet current beef production levels. Corn prices, however, are substantially below the price levels of the last two years and may encourage feedlots to increase placements after the first quarter.

Breeding Herd Down

Herd size continues to be trending down with some indications of a slow-down in liquidation and that a herd rebuilding may commence as early as 2000. The size of the breeding herd has been reduced significantly. All cows and heifers that have calved, at 42.615 million on January 1, were 1.1 percent below the 43.08 million on January 1, 1998 and 2.7 percent below the 43.776 million two years ago. Beef cows at 33.472 million, were down 1.2 percent from January 1, 1998 and 2.9 percent below January 1, 1997. Beef replacement heifers at 5.55 million were down 3.7 percent from January 1, 1998 and down 8.1 percent from 6.042 million on January 1, 1997.

Other heifers (feedlot heifers), however, at 9.994 million head, were down .6 percent from January 1, 1998 and down 2.1 percent from 10.212 million head on January 1, 1997. This appears to indicate that the rate of the accelerated cattle liquidation which began in 1996 may be slowing down.