Daily News Update, Feb. 13, 2008

U.S. beef cow numbers down due to drought, higher expenses

The effects of a severe drought in the Southeast and higher prices for land, feed and other inputs are chief reasons for a decline in U.S. beef cow numbers in 2007, according to American Farm Bureau Federation (AFBF) analysis of the U.S. Department of Agriculture's  semi-annual report of the nation's cattle inventory.

There were 338,000 fewer beef cows in the U.S. at the end of 2007 than at the end of 2006, meaning herd liquidation has occurred in 10 of the last 12 years. A year earlier, the USDA reported a drop of 103,000 cows during 2006. The 2007 beef calf crop was the smallest in the U.S. in 56 years.

"The USDA report is an indicator of U.S. beef production for the next two to three years," AFBF Livestock Economist Jim Sartwelle said. "The decline in U.S. beef cow numbers is no great surprise given the extent of the drought in several southeastern states, increasing expenses and other developments in the beef processing sector. We can draw some fairly stark conclusions about the size, shape and location of the U.S. beef cow herd heading into an increasingly volatile era with ever-increasing costs of production."

Severe drought in the Southeast forced the liquidations of herds across the region. The states of Tennessee, Kentucky, Alabama and Georgia accounted for 54 percent of the nation's beef cow herd reduction.

"Drought-forced liquidation is a tragedy no matter where it is, but given the tremendous strides southeastern cattle producers made to improve their herds in the past decade, it's an especially bitter pill for them to swallow," Sartwelle said.

The beef industry also faces some sobering economic and structural realities, Sartwelle said. High feed and non-feed input costs, skyrocketing land values and slowly recovering beef export markets are all at play.

Regarding excess capacity in the feeding and processing sectors, Sartwelle said those parts of the U.S. beef industry were built when total cattle and calf numbers exceeded 130 million head, dwarfing today's 96.7 million head.

Overall, USDA reported a 207,000-head drop in heifers kept for beef cow replacement.  Of that total, nearly 150,000 head are older replacement heifers expected to calve during 2008. Sartwelle said a relatively strong market for feeder heifers through much of 2007 and the lack of forage in many areas are the chief reasons for these decreases.

"We're not going to have a big calf crop during 2008, and we're not likely to build cow numbers significantly this year, either," Sartwelle said. "We're just not likely to exit 2008 with a larger herd than what we started this year with."

U.S. beef producers begin this year with 16 percent fewer beef cows than in 1978, Sartwelle said, but beef production per cow has increased by 30 percent during that time.  "Flat-to-declining inventories place greater emphasis than ever on the development and adoption of cost-effective reproductive, health, and nutritional practices and technologies for this sector to produce enough beef for our consumers here and abroad."

Meanwhile, U.S. dairy producers increased the number of milk cows that have calved by 1 percent or 9.2 million head. Heifers kept for milk cow replacement increased by 3 percent to 4.5 million head, and the inventory of replacement heifers expected to calve during 2008 increased by 91,000 head.

"Our dairy producers incorporate marketplace realities in their female retention decisions, but I want to be clear that dairy producers will be exceptionally sensitive to feed prices down the road," Sartwelle said.

The Agriculture Department's Jan. 1, 2008, cattle report was released Feb. 1.