Based on published USDA daily estimates, combined cow and bull slaughter is currently running at 148,000 head/week, nearing the highs for the year, and some 12% higher than the drought-impacted numbers from a year ago.
Expanding drought conditions are pushing more cows to slaughter, further reducing the potential for U.S. beef production in the coming years. The official USDA cow slaughter statistics are published with a two-week lag and still show cow slaughter levels that are about 3% lower than a year ago. And yet, the preliminary daily slaughter reports are flashing warning signs that don’t bode well for the future of the U.S. beef industry.
Based on published USDA daily estimates, combined cow and bull slaughter is currently running at 148,000 head/week, nearing the highs for the year, and some 12% higher than the drought-impacted numbers from a year ago. There was plenty of anecdotal evidence in early July that increasing drought pressure was forcing individual producers to liquidate. Based on the latest numbers, the liquidation process is now in full swing.
One thing that is quickly obvious from looking at the drought maps of this year compared to last year, is how widespread the drought has become and the dramatic impact this is having on both pastures and grain supplies. For the week ending July 24, the USDA crop progress survey indicated that 55% of all pastures and ranges in the U.S. were in poor or very poor condition. Last year, only 33% of pastures and ranges were rated poor or very poor. Indeed, last year it was one region, the Southern Plains, that felt the brunt of the drought, while this year there is a multitude of states stretching across the central U.S. all the way to the East Coast.
While the situation last year was catastrophic for producers in Texas and Oklahoma, at least they had the possibility of moving cattle to regions that had relatively good pastures. Thus, some avoided the full impact of the drought. This year, that may not be possible.
We calculate that currently some 58% of the U.S. beef cow inventory is located in states where over half of pastures are in poor or very poor condition. Last year, just 27% of the beef cow inventory was located in such states. In Missouri, a state that as of Jan. 1 had some 1.9 million beef cows, 74% of pastures were rated in very poor condition while another 22% were in poor condition. This is even worse than Texas at the peak of its drought last year.
Nebraska also has about 1.9 million beef cattle and last year only 4% of pastures there were in poor or very poor condition. This July, 72% of pastures were in a very poor/poor state. Other states seeing dramatic drought impacts include: Kansas, 1.4 million head, and 84% in very poor/poor rating; Oklahoma, 1.7 million head, and 52% very poor/poor; Iowa, 895,000 head, and 79% very poor/poor pastures; and Colorado, 749,000 head and 79% very poor/poor ratings. Weather forecasts for the next three months are not encouraging, calling for below normal precipitation and above normal temperatures.
Furthermore, the expanding drought conditions have the potential for a catastrophic impact on the current corn crop. Some recent estimates of the corn crop in western Iowa, one of the most productive corn areas in the nation, indicate the potential for a 30% decline in yields. As corn prices move up, feeder values go the other way, sharply reducing the profit outlook for cow calf producers and thus fueling the impetus to liquidate.