The annual USDA Cattle Inventory report released Friday should yield no surprises to the market but underscores how much tighter the supply is getting.
“The report reiterates the reduced cattle supply, and the difficulty of retaining heifers to enter the breeding herd,” says Andrew Griffith, University of Tennessee agricultural economist, in his weekly market
comments. “It will be a long hard drive to rebuild the herd even if we have favorable weather conditions the next few years.”
When Cargill announced the closure of its Plainview, TX, slaughter facility Jan. 17—some 2,400-head daily capacity—the company cited dwindling cattle supplies relative to packing capacity.
“While idling a major beef plant is unfortunate because of the resulting layoff of good people, which impacts their families and the community of Plainview, we were compelled to make a decision that would reduce the strain created on our beef business by the reduced cattle supply,” explained John Keating, president of Cargill Beef, based in Wichita, KS. “The U.S. cattle herd is at its lowest level since 1952. Increased feed costs resulting from the prolonged drought, combined with herd liquidations by cattle ranchers, are severely and adversely contributing to the challenging business conditions we face as an industry. Our preference would have been not to idle a plant.”
The plan to idle Cargill’s Plainview facility includes measures for preserving its infrastructure for potential reopening if the U.S. cattle herd rebounds and requires additional processing capacity. However, Cargill does not expect the U.S. cattle herd to significantly increase in size for a number of years.
Analysts with USDA’s Economic Research Service noted in the January Livestock, Dairy and Poultry Outlook, “As the drought continues, potential for more cow liquidation increases and prospects for herd rebuilding deteriorate. Drought-affected pastures could result in further placements of lightweight feeder cattle in feedlots and further reduce the supply of heavy feeder cattle for placement. Negative packer margins and record-high retail beef prices could dampen rising fed cattle prices.”