by James Mintert, Center for Commercial Agriculture & Department of Agricultural Economics, Purdue University
This year's report, released on January 31st, was of particular interest because of the collapse in both fed and feeder cattle prices that took place during 2016. The dramatic price decline, and resulting falloff in profitability by cow-calf
Unlike prior years, USDA did not provide a preliminary estimate of the 2016 calf crop back in July since the mid-year Cattle report was dropped from USDA's line-up of inventory reports. As a result, last week's report provided the first estimate of the 2016 calf crop, estimated at 35.1 million head, 2.9 percent larger than in 2015. The smallest calf crop of this cycle occurred in 2013 and the 2016 calf crop was nearly 5 percent larger than in 2013.
Key's to future cattle and beef supplies are the beef cow inventory and the number of heifers being held for future replacement or entry into the herd. USDA estimated the beef cow herd to be up 3.5 percent compared to a year earlier and more than 7 percent larger than at inventory bottom in January 2014.
Despite the fall-off in prices during 2016, cow-calf operators indicated they are holding back 1.2 percent more heifers for herd replacement this year than last year. That combination means the supply of cattle for slaughter will continue to increase not just in 2017, but also into 2018-2019.
Commercial cattle slaughter and beef production both increased just over 6 percent during 2016 compared to 2015. Cattle slaughter and beef production are both expected to increase again during 2017, although the year-over-year percentage changes are likely to be smaller, perhaps falling in a range of 3 to 4 percent.
Larger supplies imply lower prices are ahead. Prices for slaughter cattle in the Southern Plains averaged approximately $121 per cwt. (live weight) during 2016, which was 19 percent lower than during 2015. During 2017, slaughter cattle prices could decline another 6 to 8 percent as a result of the expected supply increase.
The decline in calf prices during 2016 was even more severe than the decline in slaughter cattle prices. Prices for 500 to
Recent weekly average prices in Kentucky for 500 to
Source: Purdue University