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CME: Total Supply of COF on 1 July Higher Than a Year Ago

24 July 2018

US - At the end of last week USDA released a number of key supply data for red meat and poultry, reports Steiner Consulting Group, DLR Division, Inc.

We hope to cover the implications of the latest statistics in the next few issues of the DLR. Below are a few quick bullet points:

The total supply of cattle on feed on 1 July was 11.282 million head, 4.3 per cent higher than a year ago. The supply of cattle that have been on feed more than 120 days currently is running some 28 per cent ahead of last year’s pace.

The marketing rate in June was 17.4 per cent (ratio of marketings to inventory), lower than it was in 2017 (17.9 per cent) but in line with the marketing rate we saw in 2012 and 2013. The marketing rate in July is expected to be 16.4 per cent, similar to what we saw last year but well below the marketing rate we observed in 2012 and 2013.

The large on feed inventory and the large inventory of market ready cattle should keep beef markets well supplied in the short term. Marketings in August remain key and will be critical for cattle prices post Labor day.

According to USDA the calf crop for 2018 is currently estimated at 36.5 million head, 692,000 head or 1.9 per cent higher than the previous year. This is the largest calf crop since 2007 and the higher calf supplies should continue to bolster slaughter during the next 18-24 months. Most of the increase in the calf crop came in the first half of this year.

US cattle producers expect to retain 4.6 million heifers for beef cow herd rebuilding, 100,000 head or 2.1 per cent less than a year ago. More heifers have been moving into feedlots in the last six months and it appears this trend will continue in the second half of the year. Lower heifer retention and double digit increases in beef cow slaughter imply a smaller beef cow herd by next year.

Slaughter statistics for the first half of the year show that steer slaughter at 8.325 million head was 0.5 per cent lower than a year ago. On the other hand, heifer slaughter was 8.3 per cent higher than last year.

The supply of heifers on feed currently is 7.7 per cent higher than last year compared to a 2.4 per cent increase in the number of steers currently on feed. The chart below shows the relationship between the beef cow inventory vs. heifer retention in the previous year. The numbers for 2018 are fairly close to historical levels.

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