No one buying calves since about February has needed reminding how slim supplies are getting. But, USDA’s recent mid-year inventory report offers perspective on how tight supplies will remain for at least several more years.
Beef-cow numbers declined 2% to 31.7 million head compared to a year earlier. The number of beef heifers retained as replacements is down a little more than 2%. The total cattle inventory stands at 100.8 million head, a little more than 1% less. The total estimated calf crop of 35.4 million head is the smallest since 1950.
“The decline in cattle numbers is mostly due to a variety of factors, including production costs that remain high relative to historical standards, record-high cull cow prices, and continued uncertainty in the market,” say analysts with the Livestock Marketing Information Center (LMIC). “Looking ahead, tighter supplies of available cattle will be supportive to fed- and feeder-cattle prices in 2010 and 2011. However, the degree to which the economy recovers will be a key factor in domestic beef demand and thus cattle prices over the next year.”
According to Chris Hurt, Purdue University Extension economist, “After several years of financial difficulty, producers show no interest in rebuilding the herd. As a result, beef supplies will continue to decline and prices will remain strong for several years to come. On the downside, however, beef consumption per person will lag and other animal species will gain a larger market share in coming years, especially chicken.”
Moreover, Hurt explains that if the long period of increasing consumption of meat and poultry has come to an end, the U.S. market will have limited growth potential in coming years. If that’s the case, he says the domestic market may only grow at about the same rate as the U.S. population, which is a little less than 1% annually.
“The best hope for more rapidly growing meat and poultry demand will probably come from exports,” Hurt says. “The most robust growth will likely be in developing economies.”