the beef industry in 2000: cattle inventory--management marketing memo 388

KEY FACTORS FOR THE BEEF INDUSTRY IN THE NEW MILLENNIUM: CATTLE NUMBERS
P.J. Rathwell, Extension Ag. Economist

The new millennium is here. The cattle industry did not blow-up. In fact, it appears that the industry is poised to due very well in the first years of the next century. Cattle-Faxhas taken a look at the cattle industry and made several predictions for the industry as we start the new millennium. Their insight is interesting. Their comments could have a significant impact on cattle producers in the Carolinas. Let=s look at some of the factors that will shape the first few years of the next millennium.

CATTLE INVENTORY LEVELS

First, let=s consider cattle inventory numbers (Table 1). The U.S. cattle industry is expected to be down another one percent (1.2 mil head) to 97.3 million head on January 1, 2000. Beef cow numbers are expected to remain about the same; total cow numbers will rise slightly due to increases in dairy herd numbers. The US dairy herd will likely decline from this level due to a significantly lower price paid for milk in 2000.

TABLE 1. CATTLE NUMBERS, SLAUGHTER AND PRODUCTION

	------CATTLE NUMBERS--------					-CATTLE SLAUGHTER-			----------BEEF---------
	Total Cattle	Total Cows	Beef Cows	Calf Crop	Total		Steer & Heifers	Cows	Production	Consump- tion
	(million head)					(million head)			(bil. lbs)	(lbs)
1991	96.4	42.5	32.5	38.6	32.7		26.4	5.6	22.8	67
1992	97.6	42.7	33	38.9	32.9		26.4	5.8	23.0	66.7
1993	99.2	43.0	33.4	39.4	33.3		26.6	6.1	22.9	65.3
1994	101	44.1	34.6	40.1	34.2		27.6	5.9	25.1	67.6
1995	102.8	44.7	35.2	40.3	35.6		28.6	6.3	25.1	67.6
1996	103.5	44.7	35.3	39.8	36.6		28.6	7.3	25.4	68.3
1997	101.7	43.8	34.5	39	36.3		29.1	6.6	25.4	66.9
1998	99.7	43.1	33.9	38.6	35.5		28.9	6.0	25.7	68.1
1999	98.5	42.6	33.5	38.4	36.4		30.0	2.5	26.4	69.2
2000	97.3	42.7	33.4	38.3	35.4		29.0	2.8	25.5	66.4
2001	97	42.9	33.7	38.3	34.2		27.8	5.8	24.6	63.2
2002	98.2	43.2	34.1	38.6	33.5		27.0	5.9	24.0	61.2
2003	99.5	43.6	34.6	38.9	33.2		26.6	6.0	23.8	60.6

The calf crop in year 2000 is also projected to decline matching the decline in beef cow numbers. Feeder-cattle and calf supplies outside of feedlots are pegged at about 30 million head, 5% smaller than in 1999. Smaller feeder and calf supplies indicate that feedlot placements will also fall in 2000. This decline will significantly and positively affect fall 2000 calf prices.

Another factor affecting feedlot placements in 2000 is the likely increase in heifer retentions by cattle producers. This will add further pressure on feedlot placement activity by reducing the available supply of animals placed in feedlots in 2000 (Figure 1). Commercial heifer slaughter set a record in 1999. Heifer slaughter as a percent of total commercial slaughter was 32.6% or just under 12 million head.

Keeping in line with cattle inventory projections for 2000 beef production will also be below 1999=s record level. Total slaughter is projected at 35.4 million head (Table 1 and Figure 2); one million head below last year=s slaughter levels. Total beef production will decline by 3 to 4 percent to 25.5 billion pounds.

Beef exports grew by 7 % in 1999. Beef imports in 1999 increased by 8 percent. It is likely that growth in both imports and exports will continue in 2000. Import growth will come from an increase in Mexican feeder cattle into Southern Plain feedlots to offset smaller U.S. feeder supplies. Export growth will occur from increased shipments of beef products to Mexico and Korea. Hide and offal export values should also continue to support overall fed cattle prices.

Total meat supplies in 2000 are projected to be about equal to 1999 levels. Expected declines in pork and beef supplies will be offset by increased broiler production. The pork industry will likely take time out to consolidate the profits obtained in late 1999. Breeding-herd levels are expected to stabilize with prices averaging in the low-$40=s.

Total poultry production is expected to increase by about 4% during 2000. Low feed prices and modest profits continue to drive this industry. Smaller export sales will likely occur due to sluggish economic growth in Eastern European countries.

Improved demand for beef remains the biggest story for the cattle industry in 1999. Wholesale beef prices are up nearly 10%. Fed cattle prices are up 6% over last year=s prices. Prices for feeder cattle and stocker calves are at the highest levels in six years. All of this with record large beef production levels.

Demand has been better in 1999 due to a number of reasons: a healthy economy with accompanying increases in consumer spending, increased away from home meal consumption, more convenient beef products, increased beef exports and increased spending on beef due to millennium parties.

This improvement in demand is expected to continue in 2000. Smaller cattle supplies and the resulting lower beef production levels will support beef prices at all levels of the marketing channel for the first few years of the new millennium.

updated 1/17/00