Cattle Inventory Report Reflects More Expansion Than Anticipated

January 31, 2017 02:49 PM

Nearly every category in USDA's Cattle Inventory Report came in higher than expected, showing the U.S. cattle herd expanded more than anticipated during the past year. The U.S. cattle herd as of Jan. 1 was 1.667 million head (1.8%) larger than the previous year and 585,000 head more than traders expected. The 2016 calf crop at 35.083 million head topped the previous year by 996,000 head (2.9%) and came in 613,000 head more than the average pre-report estimate implied.

 

Cattle Inventory Report

USDA

Avg. trade estimate

Range

 
 
 

% of year-ago

All cattle & calves

102

101.1

99.9-101.8

2016 calf crop

103

101.8

101.4-102.2

Total cows/heifers calved

103

101.1

99.5-102.0

beef cows/heifers calved

103

101.4

99.2-102.2

milk cows/heifers calved

100

100.4

99.8-101.0

Heifers 500 lbs. and over

101

100.8

100.4-101.4

Beef replacement heifers

101

99.2

98.0-100.2

Milk replacement heifers

99

100.4

98.5-101.6

Other heifers

101

102.9

102.1-104.4

Steers 500 pounds and over

100

101.3

100.5-102.0

Bulls 500 pounds and over

104

100.5

99.2-102.7

Calves under 500 pounds

102

101.1

99.6-103.3


Not only was herd expansion greater than anticipated, but the data also shows cattle producers held back more heifers for breeding purposes than anticipated. Beef replacement heifers totaled 6.419 million head, up 79,000 head (1.2%) from last year. Traders expected a 0.8% decline in beef replacements based on the average pre-report trade estimate. In fact, the 1.2% increase was a full percent above the top end of estimate range. Feedlot data over the final three quarters of 2016 showed heifer numbers were up from the previous year, suggesting the herd expansion phase had ended. This data signals that is not the case.

Beef replacement heifers expected to calve during 2017 are forecast up 1.6% from last year. When factoring that into the beef cow numbers, we expect the 2017 calf crop to top last year by roughly 2%.

The U.S. milk cow herd came in just 39,000 head (0.4%) bigger than last year at 9.349 million head. But milk replacement heifers are down 60,000 head (1.2%) from 2016, signaling dairy operations have halted herd expansion.

With nearly every beef herd category coming in higher than expected, the data is negative for the cattle market. When combined with last week's negative Cattle on Feed and Cold Storage Reports, the cattle market faces fundamental hurdles from both the supply and demand side of the market.