By Jim Mintert

USDA released its annual Cattle Inventory Report at the end of January. The report confirmed that although the U.S. cattle herd was still growing during 2017, the rate of growth slowed sharply compared to recent years. The National Agricultural Statistics Service estimated that the Jan. 1 inventory of all cattle and calves totaled 94.4 million head, up less than 1% compared to a year earlier.

The beef cow inventory increased a bit more rapidly during the last two years than the all cattle and calves inventory. In 2016, the beef cow inventory increased 3.5%, followed by a 1.6% increase in 2017 — so growth still slowed sharply during 2017 compared to peak inventory growth in 2015 and 2016.

The larger cow herd is producing bigger calf crops. USDA estimated the 2017 calf crop at 35.8 million head, up 2% from 2016. This was the third consecutive calf crop increase. These increases fuel jumps in cattle slaughter.

Commercial cattle slaughter during 2017 totaled 32.2 million head, an increase of just over 5% compared to a year earlier. Compared to 2015, when cattle slaughter bottomed out at 28.8 million head, 2017’s slaughter was 12% larger. Beef production during 2017 didn’t increase as rapidly as cattle slaughter since dressed weights averaged 1.4% below a year earlier. Beef production during 2017 rose 4% over 2016.

Bigger meat supplies
Increases in the beef supply in 2018 will be compounded by rising supplies of competing meats. Per capita supplies of red meat and poultry bottomed out in 2014 at 202 pounds and have increased steadily since. In 2017, per capita red meat and poultry supplies reached 217 pounds and are forecast to fall in the 221-to-223-pound range during 2018. If domestic meat supplies reach the upper end of that range, it will be a record. The surprisingly quick rebound in meat supplies over the last four years could pressure retail meat prices and farm gate prices for both finished cattle and calves.

U.S. consumer meat supplies are dependent not only on U.S. production levels, but also on movement of meat products through export channels, since U.S. supply estimates are the net of all imports and exports. Export demand for U.S. red meat and poultry has improved steadily over a long period of time. For example, during 2017, net exports of red meat and poultry were nearly 12% of U.S. meat production, and are expected to equal or exceed that level in 2018. In the early part of this century, meat exports were ranging between just 4% and 7% of U.S. production.

Cattle prices
Where beef and cattle prices wind up in 2018 will depend not only on supplies, but also on strength of both domestic and export demands. Domestic beef demand showed signs of strengthening during the last half of 2017. A strong U.S. economy, resulting in improving consumer disposable incomes, bodes well for meat demand, especially beef. Still, looking at meat supplies facing U.S. consumers, odds would favor somewhat weaker prices for beef and cattle in 2018 compared to 2017. Additional strength in domestic beef demand resulting from a strong U.S. economy could soften the impact of rising supplies, but probably not eliminate it.

Mintert is director of Purdue University’s Center for Commercial Agriculture. He writes from West Lafayette, Ind.