Beef cow herd keeps shrinking cyclically
Different data gatherers within USDA align the definition of a cow with how analysts will use the data. USDA’s Agriculture Marketing Service (AMS) focuses on marketing characteristics. AMS defines a cow as"A female bovine that has developed through reproduction or with age, the relatively prominent hips, large middle and other physical characteristics typical of mature females."
USDA’s National Agricultural Statistics Service focuses on production and inventory characteristics. NASS defines a cow as "A female bovine that has had at least one calf." NASS further distinguishes milk (dairy) cows from beef cows. A milk cow, is a cow, excluding a nurse cow, regardless of breed kept primarily to produce milk for home use or for sale. Dairy cows and dairy replacement heifers make up 14% of all cattle and calves in the United States.
A beef cow, is a cow, regardless of breed, kept primarily to raise or nurse calves. Beef cow inventories largely determine the number of feeder cattle entering feedlots and eventual slaughter supplies. The number of cattle slaughtered is the primary determinant of the supply of beef. The interaction of supply and demand determines the market price level.
Beef cows and beef replacement heifers make up 35% of all cattle and calves.
Head count changes drive cattle cycle
Analysts watch changes in estimated beef cow and beef replacement heifer inventories for clues on whether producers are shrinking or expanding beef herds, and by how much.
Based on producer surveys for the biannual Cattle report, USDA NASS estimates the July 1, 2023 US beef cow inventory at 29.4 million head (Table 1). This is down 800,000 head or 2.6% from July 1, 2022. This is the fifth consecutive year-over-year decline in the July 1 beef cow herd and the lowest mid-year beef cow inventory in the history of the data going back to 1971.
The milk cow inventory is unchanged from July 1, 2022, at 9.4 million head. Dairies are facing compressed margins in 2023 with both supply and demand pressures influencing milk prices. But dairies are not liquidating. One reason is dairies are relatively high fixed cost operations. In the short-term, dairies minimize losses by maintaining full production as long as prices cover variable costs.
Heifers held for beef cow replacement on July 1, 2023 totaled 4.05 million head, 2.4% below the 4.15 million head on July 1, 2022. This is the lowest July 1 beef replacement heifer inventory on record dating back to 1973 when the data series began. Dairy heifers held for replacement totaled 3.65 million head, which is the smallest number since 2004.
More market data on crossbreds would be useful
The availability and rising adoption of sexed semen allows dairies to focus artificial insemination on the highest quality dairy cows and heifers for producing dairy replacement heifers. Dairies can breed the remaining dairy cows and heifers to beef breeds to produce beef-dairy crossbred calves. Crossbreds have better feed efficiency, gain, etc. in feedlots as well as more favorable carcass yield and muscle conformation, compared to straight dairy animals, which brings their value closer to beef breed calves.
USDA AMS does not currently identify beef-dairy crossbred cattle separately in Livestock Mandatory Reporting data collected from packers. AMS only offers two fed cattle categories: beef or dairy. Therefore, packers may report purchases of beef-dairy crossbred cattle as either dairy, or beef.
USDA AMS does publish head count, dressing percent, weight range, weighted average weight, price range, and weighted-average price for fed dairy steers and heifers separately from beef breed fed cattle. Given the growing share of beef-dairy crossbred cattle in feedlots, collecting and publishing beef-dairy crossbred fed cattle information would greatly aid in efficient price discovery.
Dairy producers show some optimism
USDA NASS surveys producers on prices received for animals sold for dairy herd replacement. NASS publishes those prices in the January, April, July and October Agricultural Prices reports. Nationally, for July 2023, the average price received for milk cows was $1,760, an increase from April 2023 of $40.00 (up 2%). Year-over-year the increase was $50 per cow (up 3%). The July 2023 price was the highest since April 2016.
Despite current dismal dairy profits, stronger dairy replacement prices suggest producers expect economic conditions to improve. Sales of culled dairy cows and bulls, as well as dairy bull (steer) and heifer calves not held as replacements that enter the beef system as feeder cattle provide additional income for milk producers. Those prices remain exceptionally strong.
Projecting feedlot placements
Analysts assess the number of cattle outside feedlots available for placement into feedlots by adding the number of steers 500 pounds and over, other heifers 500 pounds and over, and calves under 500 pounds and then subtracting the total number of cattle currently on feed. These categories include beef breeds, dairy breeds and beef-dairy crossbreds. Other heifers are heifers that will not be bred as replacements for the beef or milk herd but will instead be destined for feedlots.
The number of feeder cattle not currently in feedlots is 34.4 million head, which is smaller by 3.6%, or 1.3 million head, than at this time last year (Figure 1). This is the second smallest feeder cattle supply in the data series back to 1973. Only 2014 was smaller by 100,000 head.
From the supply side of the equation, calf, feeder cattle and fed cattle prices are all expected to continue increasing. This may or may not result in high returns. Costs remain high, and demand is key.
Maximize revenue generated from cull cows
Cows that are greater than 42 months old are eligible for USDA carcass quality grades of Commercial, Utility, Cutter, and Canner. These grades, however, do not reflect common trade practices for slaughter cows. Instead, slaughter cows are commonly procured based on body condition scores (a measure of live animal fat cover). Body condition scores range from 1 (extremely emaciated) to 9 (very obese).
Brakers (or Breaking Utility) are slaughter cows with a body condition of 7 or higher and are expected to yield carcasses in the range of 75-80% lean and are processed into various cuts.
Cows with a body condition score of 5 to 7 and an estimated red meat yield of 80-85% are classified as Boning (or Boning Utility) and yield a few merchandisable cuts but are mostly used for boneless beef.
The Lean classification refers to cows with a body condition score of 1 to 4 and an estimated red-meat yield of 85-90% and yield at most a few merchandisable cuts with the majority of the carcass used for boneless beef.
Some cows fed a high-grain diet may develop a white fat and be designated Premium White and have an estimated red meat yield of 65-75%.
Market reports sometimes differentiate slaughter cows within each class, according to dressing percentage estimated as low, average, or high.
From the Sioux Falls Regional Livestock Auction - Worthing, SD report, published by the USDA Agricultural Marketing Service Livestock, Poultry, & Grain Market News and the South Dakota Department of Ag Market News, Breakers have represented roughly 26% of the head count so far in 2023 while Boning cows have represented 32%, Lean 36%, and Premium White 6%.
Producers who sell slaughter cows should pay close attention to market reports about the price differentials of the cows in these classes. Cows that can be fed enough to gain body condition to step up in classifications can add weight, and value, at the same time. The average price so far in 2023 for Premium White cows of average dressing has been $115.25 per cwt. according to the South Dakota report. Breaker cows have averaged $104.67 per cwt., Boning cows have averaged $96.13 per cwt., and Lean cows have averaged $86.45 per cwt.
Slaughter cow prices are typically lowest in the fall as many producers sell cull cows right after weaning. This offers opportunities to add value through adding weight, improving quality, and taking advantage of seasonal price patterns. The Cow Sell Calculator Decision Tool available from the Iowa State University Extension and Outreach Ag Decision Maker website compares opportunities for marketing cows at weaning or incurring additional costs to target other (later) markets.
Lee Schulz, extension livestock specialist, 515-294-3356, firstname.lastname@example.org