A Few Thoughts – How many cows do you have?
February 8, 2018
How many cows do you have? That's a fairly innocuous question or so it seems, but there was a time in the cattle industry when it was bad manners to ask a rancher how many cows he owned. In fact, it was something akin to asking how much money he had in the bank. That unwritten rule was impressed upon me from about the first time I stepped foot on a ranch fifty years ago. I actually had to overcome my adherence to it when a business partner and I started a company to certify herds for age and source verification and had to ask how many cows the customer had in their herd.
The USDA began asking ranchers how many cattle they have since about 1867 and I don't think it would be too cynical to suggest that producers have not always given an exact number of cattle they own – or if they even knew for matter. Surveys are audits combined with statistical analysis. From the perspective of industry analysis, the issue is how do we as analysts view these surveys and incorporate that data into our market analysis.
The USDA livestock inventory surveys are one piece of information that goes into the analysis. In addition, I incorporate my knowledge and experience in the industry. What are cattlemen doing – not just according to the numbers but also with regard to current market conditions, forage supplies, profitability, and last but not least, their expectations for all of the above. Certainly, a drought can change everything. These are important considerations when looking at the inventory reports and can cause you to question the numbers. I often question the survey results in a cattle or hog inventory report. I am not necessarily saying the report is wrong but rather taking into consideration other factors that I think would influence the numbers.
USDA indicated the January 1, 2018 cattle inventory was 94.4 million head, up less than 1 percent from 2017. This represents a sharp slowdown in herd expansion that began in 2014. The number seems low given my estimates of profitability to cow-calf producers and forage conditions in major cattle production regions. In particular, I am surprised at the sharp drop in the number of bred replacement heifers this year (bred last year). There have been several years when the number of indicated heifers calving and entering the herd has far exceeded the surveyed bred heifer number.
The surveys are just surveys. The estimates must be considered with other data before drawing too many conclusions. The rule is consistency across data and industry knowledge. Just a few thoughts!