Records are Made to be Broken!

The USDA’s January 1 cattle inventory report places the total number of cattle and calves at 87.2 million head, consistent with trade expectations for a 1.90% decline from a year ago, as the industry continues into a fifth consecutive year of contraction within the cattle cycle. The report mostly confirms anticipated year over year drops across all inventory categories with fewer beef cows than any time since 1961 and the lowest total inventory since 1951. As expected, all cows and heifers that have calved total 37.6 million head, also nearly 2% below last year, reflecting 2% fewer beef cows at 28.2 million head and just a slight drop in dairy cows at 9.4 million head. Similarly, beef replacement heifers are down about 1.45% from a year ago, while dairy replacement heifers are just fractionally lower. Overall, the inventory of all heifers weighing 500 pounds or more is down about 1.48%, compared to expectations for just a 0.9% decline. Bulls and steers weighing over 500 pounds are down 0.41% and 1.66%, respectively. Only calves under 500 pounds at 2.73% lower really surprised analysts, coming in below the range of pre-report estimates. Lesser but still notable deviations from expectations include bulls over 500 pounds and the same weight other heifers category, which are both down by 0.41% and 1.97%, respectively, placing them near the upper end of pre-report estimates. While some of the other heifers may yet be bred as replacements, depending on rains and forage development as the year moves onward, a number of these animals are feasibly destined for feedlots. Correspondingly, the 1.45% drop in beef replacement heifers falls within widely ranging pre-report estimates but is nearly twice as low as the average expectation of just 0.75% lower, supporting continued industry contraction. The calf crop at 33.6 million head or 2% below the prior year is, as expected, the lowest since 1940, which should be bullish for feeder calf prices in the near-term and fed cattle prices down the line.