By DOUG SCHMITZ
Iowa Correspondent

WASHINGTON, D.C. — While the latest USDA Cattle Inventory Report showed overall beef cattle numbers slightly down by 400,000 head from July 2006, one industry analyst said the report provides support to cattle markets through 2009.

“Based on Friday’s cattle inventory report, which detailed overall beef cattle numbers and the figures reported for beef replacement heifers, we should have continued strong beef cattle markets all the way through 2009,” said Jim Sartwelle, livestock economist for the American Farm Bureau Federation (AFBF).

According to the report, released on July 20, all U.S. cattle and calves totaled 104.8 million head, down 400,000 head from July 2006, with beef cows calved plunging to 100,000 head from midyear 2006, at 33.35 million head, compared to 33.45 million last July.

As for U.S. dairy cows, Sartwelle said those that were calved were unchanged from July 2006, totaling 9.15 million head, unchanged from last year at this time, with expectations ranging from 99.3 percent to 100.5 percent at an average of 100 percent.

“Recent strength in the milk and dairy products markets have encouraged dairies to hold inventories at current levels,” he said, “if not expand their milking strings.”

The report also said U.S. heifers weighing 500 pounds or more were placed at 16.6 million head, steady from a year ago, with beef cow replacement at 4.7 million head, down 6 percent from July 2006, dropping by 300,000 head.

“That number alone indicates reduced calf supplies through 2008,” Sartwelle said about the report, which indicated U.S. milk replacement heifers at 3.9 million head, or 3 percent from 2006, and other U.S. heifers at 8 million head, or 3 percent more than a year ago.

“The heifer that does not get kept back for breeding purposes in 2007 does not produce a calf in 2008, and does not yield a fed steer or heifer for harvest during 2009,” he said.

Dale Thoreson, Iowa State University (ISU) beef field specialist who oversees 13 counties in upper Northeast Iowa, said the number of beef cow replacements at 94 percent for 2006 and 2005 inventories indicated that more heifers have been placed into feedlots rather than held for replacement or cow herd expansion.

“Again, the drought in the western states over several years has made it more difficult to expand herds,” he said. “Some of the more fragile pastures will need more than one year to recover from extended shortage of rainfall.”

Thoreson said a smaller number of calves coming into the feedlot this fall and winter would likely cause the feedlot segment of the industry to be strong bidders for this shorter supply of feeder cattle, which could result in fewer cattle on feed, “unless there’s a shortened wheat-grazing period in the Southwest.”

In addition, the report said U.S. steers weighing 500 pounds or more totaled 14.9 million head, compared to 15 million on July 1, 2006. Bulls weighing 500 pounds or more were at 2.1 million head, unchanged from July 2006, and calves weighing 500 pounds or less were at 28.7 million head, compared to 28.9 million in 2006.

Sartwelle said U.S. cow-calf operators have seen strong calf prices for the last two years, with strong incentives to build cow numbers.
“You don’t have to look any further than the weather map to see the reason the most recent herd expansion has stalled, as continued dry weather in parts of the intermountain West and the Southeast have induced herd reductions,” he said. “Indications are that trend has slowed in the Southeast with recent rains.”

In addition, the U.S. calf crop for the first six months of 2007 is estimated at 27.15 million head, down 200,000 head from January through June 2006, which Sartwelle said supported continued strong cattle and calf markets for the next 24 to 30 months.

“We have questioned what the effect of the 2006 drought in Texas and the Southwest would be, and it is now apparent there was at least a slight dampening effect on rebreeding brought on by drought stress,” he said.

“The bottom line for this semi-annual inventory report is the current cattle cycle might be one of the shortest ever, continuing to squeeze calf and feeder cattle supplies,” he said. “This supply squeeze will continue to mitigate much of the volatility of the corn market.”

Joe Sellers, ISU beef field specialist who covers 12 counties in central Iowa, agreed with Sartwelle, and said the expansion in the U.S. beef industry has stalled due to drought that reduced cow numbers in the West, resulting in higher feed costs in the Midwest.
“This probably will support calf prices and fed cattle prices,” he said, “but increased costs will reduce profit margins.”

Sellers said this year’s forage acres are short, with pasture yields being reduced.

“[M]any local producers are concerned about maintaining their cow herds at current levels,” he said, adding that the use of coproducts may be an opportunity, but it doesn’t fit every cow operation.
But Chris Hurt, Purdue University extension marketing specialist, said last Monday that although the numbers are low, U.S. cattle prices “have been on a roll in recent months,” which would bode well for the rest of 2007 and 2008.

“The cattle industry has been through a lot in recent years, including BSE, restricted imports, multiyear droughts in western states, drought in the Southeast in 2007, and fears of corn prices going above $4 per bushel,” he said. “It’s no wonder cow-calf producers have leaned more to liquidation than expansion.”

Yet, despite this, Hurt said the price prospects were good; in the first half of 2007, per capita beef production was down about 1 percent, with finished cattle prices up 9 percent.

Hurt said positive price signals are part of the outlook as well, including “smaller per capita beef supplies over the next 12 months, a beef breeding herd that is headed downward, and strong domestic demand.”

“It now appears that 2007 will provide record-high finished cattle prices, averaging near $92 per hundredweight,” he said. “Brood-cow producers will also be pleasantly surprised by near-record calf prices this fall and winter as both the optimism of finished cattle prices and the recent sharp drop in corn prices are reflected in upward adjustments to calf prices.”

In Iowa, there were 824,000 cattle on feed for the slaughter market in all feedlots in the state as of June 1, 2007, down 4 percent from May 1, 2007, and down 2 percent from last June. Iowa feedlots with a capacity greater than 1,000 head had 520,000 head on feed, down 2 percent from last month, but up 11 percent from last year.

Conducted by the USDA’s Agricultural Statistics Board, the latest report of July 1’s estimated U.S. cattle and calves used a random sample of producers surveyed to provide estimates data, which were collected during the first half of June from about 40,000 small- and medium-sized U.S. cattle operations.