9 February 2009

3 minute read

North America

Ron Plain

Not only did the January 1 cattle inventory come in below trade estimates, the USDA revised down the 2008 estimates. The total number of cattle and calves in the inventory was down 1.6 percent from last year but down 2.3 percent from the original 2008 estimate. The trade estimate was for the total number to be down only 0.7 percent.

The total number of cows and heifers that have calved was down 1.6 percent from the revised 2008 number and the trade estimate was to be down 0.7 percent. The number of heifers being held for beef cow replacements was down 2.1 percent according to USDA the trade estimate was for a 2.3 percent decline.

The 2008 calf crop was revised down 3.1 percent from the original estimate in the summer of 2008 and was 1.8 percent below the 2007 calf crop.

The futures market on Monday responded with substantial gains across the board. However, the sobering information is that we have 2.1 percent more young cattle outside feedlots not being held for breeding herd replacements than last year. Therefore, beef supplies in 2009 will be down but not a large decline.

The demand for the three major meats is weak. Beef demand for January-December last year was down 4.1 percent, pork demand was down 3.5 percent and broiler demand was down 1.0 percent. The weakness in the general economy and the high levels of unemployment are probably the major reason for the weakness in beef demand.

Total cow slaughter last year was 8.6 percent above 2007. Beef cow slaughter was up 12.3 percent and dairy cow slaughter was up 3.8 percent. These larger cow slaughter levels contributed to the 1.6 percent decrease in the size of the cow herd during 2008.

With the higher priced feed and weaker demand for beef the U.S. needs to reduce the cow herd more than approximately three percent that the 2009 cow herd is down from the 2007 high for this cycle. How much additive decline is needed is not highly predictable but probably at least another two to five percent will be needed to get the industry profitable for most producers.

Feeder cattle were steady to $2 per cwt higher and steer and heifer calves were $2-4 per cwt higher than last week at Oklahoma City this week.

The prices by weight groups for medium and large frame Number One steers at Oklahoma City this week were: 400-500 pounds at $110-185 per cwt, 500-600 pounds at $103-113 per cwt, 600-700 pounds $95.50-104.50 per cwt, 700-800 pounds $91-97.75 and 800-1,000 pounds at $87.50-94.75 per cwt.

Wholesale beef prices continued to struggle this week and Friday morning Choice beef at $136.98 per cwt was down $5.17 per cwt for the week. Select beef at $134.02 per cwt Friday morning was down $5.25 per cwt from seven days earlier.

The weighted average live price for fed steers through Thursday for the five-market area was $81.00 up $0.97 per cwt from a week earlier. The weighted average negotiated carcass price for the five-market area through Thursday at $131.07 was up $1.45 per cwt from seven days earlier.

Slaughter this week under Federal Inspection was estimated at 622 thousand head, up 1 percent from a year earlier.

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