State of the Cattle Cycle

One of the most interesting questions that I always enjoying discussing is the state of the cattle cycle. The cattle cycle is the path of cattle inventory from low to peak and back to the low point again. Our current cattle cycle began during the 2014 low-point in cattle inventory that spurred record prices. This began the eighth cattle cycle since 1938 with each ranging from 9 to 14 years.

These cycles are interesting for a few main reasons. First, it is important. National cattle supplies influence cattle prices in the Southeast. Second, it is a long-term game. It’s not something that is going to help us estimate what prices will do next week. It’s a discussion about estimating the supply impact on prices over the next few years. Lastly, it is interesting because we have data to use. The USDA Cattle inventory report comes out in January and July (usually). The January report is more comprehensive and overall the best measure. However, the July report also sheds some mid-year light on the current state of the cattle cycle.

Shown in the charts above, a few of the points that stand out in the July report recently released is the estimate of the 2018 calf crop and the estimate of the number of beef heifers held for replacement. The 2018 calf crop estimate came in at 36.5 million head. This is up approximately 2 percent over July of 2017. It also represents an almost three million head increase since the low-point in 2014. The second chart is the number of heifers held as beef cow replacements. As shown, that number is lower than last year which indicates slowing herd expansion. It’s important to note that slowing expansion is different from declines.

Put these points and many others together and we see that the herd has probably continued to grow slowly in 2018. But 2019 or 2020 could potentially be the next peak in the cattle inventory number and the high point in the current cycle.

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