Varilek’s Cattle Call: Decreased Cow Herd
The slaughter trend from the last half of 2018 continued through 2019. That trend is another increase in heifer slaughter year over year. In my opinion, we are at or past the peak of inventory in the cattle cycle. These numbers express we are continuing to decrease size of the United States beef herd. When the herd expansion started, a wise man told me to be bull spread for the next seven years and we are now nearing the end of that period.
In 2019 we saw a 6.9 percent increase in heifer slaughter marking a 4th consecutive year of an increase. Steer slaughter decreased 2.3 percent from 2018 which marked a second year of a drop in steer slaughter. Total cattle slaughter was down 1.9 percent.
Packer margins are dropping from record high levels with the large decrease in boxed beef. Packers are mostly talking of running shorter hours due to that margin change and a tighter seasonal cattle supply. The south has plenty on the showlist, but we are in the time of year where the north can gain some leverage.
Currently the moderate winter weather in most of cattle feeding country is allowing cattle to remain on feed longer. A winter storm can usually help change the mind of feeding some cattle over an average weight. The potential of a winter storm might be the last factor needed before we completely gain our leverage if we have a chance for a spring rally.
Feeder cattle sales are picking up again after the holiday season. The most notable weight breakdown is the lack of a feedyard wanting a calf to be fat in the August window. This is nothing out of the ordinary, but worth noting. There appears to be much optimism in the cattle feeding sector with some positive closeouts rejuvenating the feedyards’ pocketbooks. I hope greenbacks are the trend for 2020.
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Where were you born?” The reporter asked one of my Colorado cowboy friends.