MARKET UPDATE Drought Conditions and Weather Forecast Drive Continued Liquidation By Kevin Good, CattleFax Vice President of Industry Relations Liquidation of the nation’s beef-cow herd seen in 2019 and 2020 continues. The July 1, 2021, USDA Cattle Inventory report showed the current U.S. beef-cow herd is 650,000 head smaller compared to July 1, 2020. The La Niña weather pattern, which developed in mid-2020, continued in 2021 and is forecast to extend into 2022. It is a major reason why the beef-cow herd continues to experience liquidation. This is especially true in the western third of the U.S. as well and the Northern Plains where the drought is most severe.
other than drought have played a role in producers’ decisions to cull more cows through the first half of the year. Producers could be motivated by the highest summer cull-cow values since 2016. Utility cow prices are averaging more than $70/cwt this summer. Furthermore, pandemic challenges, processing availability and market volatility have exhausted some producers.
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Presently, nearly 30 percent of the U.S. beef-cow herd is in moderate or worse drought conditions. Yes, there were several years that were worse, particularly during the mega drought cycle between 1998 and 2013 (a timeframe when the beef-cow herd liquidated every year except two). But historically, the percentage is high and would suggest that the cow herd will continue to liquidate until weather conditions improve. Liquidation is continuing even though calf values are trading $20/cwt higher moving into the fall run compared to the past two years, and for the average cow-calf producer, would offer some level of profitability. Unfortunately, if you are located in a region with limited moisture, the lack of feed and the high price for roughage is more than offsetting the stronger calf values as the decision-maker for keeping or culling females. Year-to-date in 2021, beef-cow slaughter is running 10 percent above last year’s high numbers and well above the five-year average. Elevated cow slaughter is noted in not only the drought effected regions but also in regions like the Southeast that had adequate moisture. This would suggest that factors
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Year-to-date, the implied U.S. beef-cow culling rate is at 11.2 percent, substantially higher than last year. By comparison, this year is larger than 2012, but less than levels in 2010 and 2011. Those three years were in the middle of a massive cow herd contraction and drought cycle that was nearing its end. From 2009 to 2014, the U.S. beef-cow herd declined nearly 2 percent annually. The 2020 and 2021 drought is young by comparison, but obviously, it is taking its toll.
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DIRECTIONS 2021
