Technically 2006 will go down as an expansion year with the total cattle inventory growing by 0.3%. But even that modest expansion only occurred as a result of the Jan. 1, 2006 number being revised downward. The beef cow inventory actually was lower by 100,000 cows. Beef replacement heifers were down by 0.5% and the 2006 calf crop was actually smaller than 2005.

Six of the top 10 cow states saw cow numbers decline in 2006. That's good news for the price outlook in 2007 and for the next several years. Historically we see increased supplies with steady numbers just because of our trend for increasing weights, but higher corn will likely offset that to some degree. The net effect is the cow-calf sector, while seeing its profitability lowered, will continue to be on relatively solid footing for the next several years, especially if the corn market stabilizes with a successful crop in 2007.

-- Troy Marshall