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A cattle herd liquidation ‘on steroids’
By Tom Johnston on 11/21/2022
The cows aren’t coming home.
They, along with their young, were still filling feed yards, packing plants and meat cases across the country. At play, in mid-October, was a steady stream of production beyond the farm fence that belied an emptying of the animals meant to spend more time grazing on pastures behind it. Drought conditions were so bad that even the heifers, the young females prized for their purpose in birthing the next crop of calves, were well on their way to the slaughterhouse.
To be sure, the nation’s cattle inventory has been on the decline since 2019 (down more than 1.5 million by the start of 2022), the downturn of a cycle that tends to turn every eight to 10 years. But though they occur with a familiar rhythm of time, and for similar reasons, each cycle can unfold in ways that forge different characteristics into a unique identity. One mark of distinction for this go-round is that cows and heifers combined to make up more than 50% of federally inspected beef slaughter for the first time since 1986. That portends not only an accelerating liquidation, but also a longer delay on rebuilding.
And so, say cattle market experts, the industry can reference history to manage their expectations for the near future. However, this one, while similar, will not be the same.
“We’re doing exactly the same thing we did in 2013 and 2014 — only this time, we’re doing it on steroids,” said Don Close, marketing analyst for American AgCredit, in describing the current cow liquidation in a Rabobank podcast earlier this year.
Another sharp decline in inventory, now expected to hit by the end of this year, will be another heavy weight for the industry to shoulder. As the backhoes break ground on new packing plants and consumers begin to shift their buying habits to account for historic inflation, the muscle behind
beef demand here and abroad will be a critical factor in how the supply chain absorbs the impact.
NET:NET if you like beef it's going to cost IF you can find it.
