Beef cow inventories on July 1, 2011, were down another 1 percent year-over-year. Beef replacement heifer inventories were down by 5 percent. The lower year-over-year beef cow inventory and the 5-percent decline in beef replacement heifer inventories imply very little potential for beef cow herd expansion before 2014.
Calf crops have also declined steadily since 1995, and the 2011 calf crop is now projected to be 1 percent below 2010’s calf crop. Although there are exceptions, and because most steers and heifers are placed on feed at about 12 to 15 months of age, one year’s calf crop translates roughly into the next year’s placements of steers and heifers on feed. Thus, 2011’s lower calf crop implies a reduction of placements of feeder calves in 2012.
As feedlot inventories decline and beef cow slaughter diminishes, beef production will likely begin to decline during the last half of 2011. The impacts of smaller calf crops this year and likely next year imply a smaller pool of feeder cattle for placement in feedlots and subsequently tighter supplies of fed cattle.
Cattle prices at all levels reached record highs during the first half of 2011. Despite these record prices and their expected high levels through 2012, drought impacts, high feed and energy prices, macroeconomic uncertainty, and increased equity requirements for cattle loans have dampened enthusiasm for cow-herd expansion.
During the first half of 2011, net placements were 2 percent above placements for the first half of 2010 as drought has pushed cattle off pastures in many parts of the country, and most of these feeder cattle have gone into feedlots. This increase occurred despite relatively high corn prices and almost 4 percent fewer feeder cattle outside feedlots. With almost 4 percent more cattle in feedlots of 1,000 head or more capacity, marketings will remain above year-earlier through the third quarter. However, as marketings begin to decline in the fourth quarter, beef production will begin to decline.
While the direction prices will take over the next few months is uncertain due to heavy marketings of fed cattle, retail beef prices are likely to increase over the next several years as beef cow inventories are rebuilt and more heifers are kept for herd building and diverted from placement in feedlots. How high retail prices go will depend on the economic recovery, retail prices of pork and poultry, how rapidly exports increase and how rapidly beef cow inventories are replenished.