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Pandemic, drought lead to declining beef cow numbers
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Pandemic, drought lead to declining beef cow numbers

Cows

Photo by Tim Zeltinger.

The USDA-National Agricultural Statistics Service (NASS) released the annual CATTLE inventory report on Jan. 29, 2021, and as expected, cyclical beef cow herd liquation continued.

Beef cow numbers peaked in 2018 with liquidation occurring during 2019 and 2020. U.S. beef cows on Jan. 1, 2021, were at 31.16 million head, down 181,000 from the 31.34 million a year prior, which adds up to a total decline of about 533,100 head over the past two years.

“It’s normal cyclical decline,” said Tim Petry, NDSU Extension livestock marketing economist. “We were going up over several years, but now we’ve backed off a little bit here. So it’s not a major sell off, but we have declined the herd for two straight years, which means our calf crop will be lower this year. Looking ahead to fall, there will be fewer calves, so that’s one thing that will be supportive to feeder cattle prices.”

There are a number of factors that likely led to the decline in beef cows during 2020, with drought and the pandemic being at the forefront.

“As a result of the pandemic and a lot of restaurants being closed, we’ve been struggling a little bit over the last year,” Petry said. “Looking ahead, we’re expecting better fed cattle prices as the vaccinations come in and restaurants open back up.”

Petry also noted that USDA is expecting record beef exports this year, which is a positive for producers, but drought conditions throughout the region remain a big concern.

“Weather is really a huge concern for us because half of the beef cow herd right now is in drought,” he said. “North Dakota is really dry. Cattle ended the year in drought and pastures were challenged some, so we’re going to need some rain, not only in North Dakota, but all over the western states. If not, there will be some forced liquidation.”

On the calf side of the market, Petry says fall corn prices are a very important determining factor when it comes to fall calf and feeder cattle prices.

“We’ve seen very strong Chinese demand for corn over the last several months, and corn has gone up $2 or so,” he said. “That has affected feeder calf prices. My rule of thumb is that a 10 cent change in corn equals a dollar change in fall calf prices in the opposite direction, so we have to watch corn.”

Weather conditions are extremely dry in the western Corn Belt, and it’s shaping up to be a “big scramble” for acres this spring because of how much other commodities, like soybeans, have gone up too in price. How much corn is going to be planted and how much moisture is there going to be?

“It’s going to be a very volatile corn market, and therefore a very volatile calf market,” Petry said. “What are corn prices going to be this fall? No one knows. There are a lot of variables looking ahead, but the corn market has been straight up since August, so it’s something we have to watch on the cattle side because it will directly affect feeder cattle prices in the opposite direction.”

Petry also says there’s currently a wide range in market price for calves at the moment depending on information provided – around $25-$30 for calves of the same weight and grade.

“For producers selling calves, make sure you check with your auction market. The margins are very thin, so being at the top of that market makes a big difference,” Petry concluded.

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