CattleFax: Beef herd expansion slows down through 2020

“We’ve been in an expansion phase since 2015, and we have more cattle coming to us,” CattleFax Analyst Troy Bockelmann said during a Jan. 23 Trend+ Webinar, sponsored by CattleFax and Elanco Animal Health. 

Bockelmann looked at data suggesting that cowherd numbers are still rising but at a slower rate than over the last five years.

Prices for beef producers will be supported by continued increases in export levels and a drop in imports, he said.

Inventory

2014 marked a low in the beef cattle industry, and in the last five years, the herd increased by 3 million head. 

“A lot of that increase came in 2018. We see a slowdown in the expansion rate,” said Bockelmann. “In January 2019, we see the beef cow inventory up 180,000 and another increase in 2020 of 100,000 head.” 

Looking two to three years into the future, he expects the expansion will continue to slow as the industry tops out around the 32-million-head mark. 

With more cows in the herd, the calf crop also saw an increase of one percent in 2019. 

“Just as the beef cow inventory increase is moderating, we see a decrease of acceleration in the calf crop, as well,” Bockelmann commented. “We’re expecting a 0.6 percent increase in 2019 and a 0.3 percent increase in 2020.”

He added, “While we see a decrease in the expansion rate, there are still quite a few supplies in the calf crop.” 

Fed slaughter

Fed slaughter numbers will reflect a similar trend. 

“Because we see a 300,000 head increase in fed slaughter in 2019, much of the increase will have to happen in the first four months of the year when we have available harvest capacity,” Bockelmann explained.

However, harsh winter weather will push fed slaughter back, which might mean more level slaughter numbers through the second half of the year, he added. 

“While we can see prices supported in the early part of the year, as we build front-end supply and push cattle back, we might add more risk into the second half of the year,” Bockelmann said.

Import, export impact

The export market will continue to support the cattle industry as well, Bockelmann said, recognizing that growth has continued since markets reopened following 2003’s bovine spongiform encephalopathy (BSE) scare. 

“In 2016, 2017 and 2018, we saw growth rates above 10 percent,” he explained. “As we look over time, we have a few years of growth followed by a pullback. In 2019, we see about a six percent growth in exports in 2019.”

Asian markets continue to demand U.S. beef strongly. In particular, South Korea beef exports grew 40 percent last year, and Japanese exports increased eight to 10 percent. 

“We also see strong beef exports to Mexico. Demand is weaker from Canada, but all in all, we’re continuing to see growth in beef exports,” Bockelmann said. “Growth is slower, however, than we’ve seen in the recent past.” 

Imports have been relatively steady over the last three years. 

Australia’s cattle industry was stricken by drought in 2014-15. Though they started to rebuild in 2016-17, another harsh drought led to a nine percent jump in cattle slaughter in 2018. 

“We expect beef production to be down about six percent,” Bockelmann said. “As a result, imports to the U.S. will slow down, and demand in Mexico reduces the amount of beef Mexico exports to the U.S.” 

Bottom line

“The bottom line is, when we come down to it, a 300,000 head increase in slaughter, six percent increase in beef exports and overall four percent decrease in beef imports, per capita supplies are going to be relatively flat in 2019,” Bockelmann emphasized. 

A threat of either U.S. or global recession in 2019 and 2020, coupled with trade negotiations around the world, may negatively impact beef prices through the next decade, depending on the U.S. position in such negotiations. 

 Bockelmann explained that, particularly on the Pacific Rim, lower tariff rates as a result of the Trans-Pacific Partnership for countries that compete with the U.S. could spell trouble for prices over the long term.

“Trade is really what caused flat per capita supplies from 2017-19,” he said. “Increase in supplies comes from increased production.” 
Bockelmann commented, “When we think about the importance of trade on the U.S. market, it comes down to per capita consumption and how much beef is available in the U.S. market.”

Elanco Animal Health sponsored the Trends+ webinar. 

Look for more from the webinar in upcoming editions of the Roundup.

Saige Albert is managing editor of the Wyoming Livestock Roundup and can be reached at roundup@wylr.net.