Drought conditions have once again impacted the cattle industry in the United States, causing cattle numbers to decline and creating challenges in meeting market demands. The current situation mirrors the beginning of the previous low in beef cow numbers.
While cattle prices are on the rise, reminiscent of the 2013 prelude to herd rebuilding, the lingering drought in key beef cattle regions of the central and southern plains restricts the industry's ability to respond effectively. Although beef cow slaughter typically indicates the end of liquidation and stabilization of the cow herd, it has only decreased by around 11 percent compared to the previous year, with the year already one-third over. In 2014, beef cow slaughter dropped by over 18 percent, putting the brakes on herd liquidation. It is likely that ongoing drought conditions have masked continued liquidation in some areas up to this point. While signs of drought improvement are promising, further beef cow herd liquidation is anticipated in 2023.
The inventory of bred heifers on January 1 has decreased by 5.1 percent compared to the previous year, marking the lowest inventory since 2011. This, coupled with the relatively slow reduction in beef cow slaughter, suggests that additional liquidation of the beef cow herd is likely this year. If drought conditions continue to improve, 2024 may be the low point for the herd, similar to 2014, but with even lower beef cow inventories. The peak in cattle prices in 2014 led to record heifer retention in subsequent years, boosting the beef cow herd.
The supply of replacement heifer calves available for breeding this year is very low, indicating potential limitations in adding heifers next year. However, some heifers not reported as replacements may still be bred, potentially increasing their numbers this year. Nevertheless, the overall supply of heifers remains limited. Although the inventory of heifers in feedlots is declining, heifer slaughter in 2023 has been slightly higher compared to the previous year, following the high levels observed in 2022. In fact, heifer slaughter in 2022 accounted for 30.6 percent of total cattle slaughter, the highest proportion since 2005. While heifer slaughter is expected to decrease gradually throughout the year, similar to beef cow slaughter, the rate of decline is relatively slow.
Considering these factors, it is likely that heifer retention will commence in earnest in the coming fall, with heifer calves to be bred in 2024. Modest herd expansion may occur next year, with the potential for faster herd expansion beyond 2024.
The U.S. cattle industry faces significant challenges due to drought and the resulting herd liquidation. However, with cautious optimism surrounding improving drought conditions and strategic management practices, the industry can navigate these hurdles and pave the way for future growth and stability in the years to come.