March 2013 Articles

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Beef Cow Slaughter and the Expansion Question

Beef Cow Slaughter and the Expansion Question Ross Pruitt, Department of Agricultural Economics and Agribusiness, LSU AgCenter
Through the first eighteen weeks of this year, U.S. cow slaughter has declined about 3% relative to last year. Year-to-date dairy (YTD) cow slaughter is currently about 1% greater than 2011 while YTD beef cow slaughter is 7.6% below last year. Region 6 which was hardest hit by last year’s drought (and includes Louisiana) has seen beef cow slaughter decrease by 15.6% YTD. Beef cow slaughter in some regions has increased over last year, specifically states surrounding the Great Lakes and parts of the southwestern U.S. Drought conditions in the southeast continue to form and bear watching.
Approximately 1.08 million beef cows have been culled so far this year which, if the current pace of culling holds steady, would suggest 3.11 million beef cows being slaughtered in 2012. This would equate to approximately an 18% decline in 2012 beef cow slaughter year-over-year. That rate would not be enough to see any expansion in the beef herd this year. Year-over-year slaughter may see additional declines during June as that’s when 2011 beef cow slaughter began to significantly increase relative to 2010. Even if those decreases do materialize, it will likely not be enough for expansion of the beef herd to be attainable this year. Stabilization of the beef herd or a slowing in the rate of contraction is still possible.
Approximately 53% of beef replacement heifers annually are placed as beef cows in the national herd. The current pace of beef cow slaughter would require approximately 60% of replacement heifers just to end 2012 with as many beef cow as there were at the beginning of the year. There have only been two occasions since 1990 when the amount of beef heifers placed approached the 60% threshold which illustrates the difficulty in reaching this level, especially given the current situation of tight supplies of feeder cattle. While not all of these replacements calve in the year listed as replacement heifers, the closer that beef cow slaughter can approach or exceed a 20% year-on-year decline, the less replacement heifers will be needed to enter the herd just to finish 2012 with as many cows as the year started. The number of heifers placed had been trending upward since 2008 indicating expansion was attempting to occur, but last year’s drought eroded these attempts to expand the beef herd when combined with higher than previous levels of beef cow slaughter in 2010 and 2011.
The decline in beef cow slaughter has contributed to weekly cull cow prices in the Southern Plains reaching the $90/cwt threshold (averaging 14% and 61%, respectively, higher per week than 2011 and the 2006-10 average). Continued declines in beef cow slaughter will result in higher cull cow prices as processors will need to increase incentives to meet demand for ground beef. Despite the LFTB scare two months ago, most ground beef trim prices are averaging 10% higher than a year ago. Fresh 50% lean beef trim has not fared as well as it was a major component in LFTB, but 50% lean beef trimming doesn’t normally come from cull cows.
As hinted out in the beginning of this discussion, the weather will be a limiting factor into the possibilities regarding the size of the nation’s beef herd at the beginning of next year. Should expected declines in beef cow slaughter begin to increase over the next couple of months, it will be interesting to see how high cull prices will go to provide incentives for producers to cull.