By CAROL RYAN DUMAS
As the drought continues in much of the country, the potential for more cow liquidation increases and the prospects for herd rebuilding deteriorate.
But higher cow slaughter also brings the potential for more heifers to be retained to replace cows going into slaughter, with producers keeping an eye on rebuilding the herd for the future.
"Heifers being generally smaller and less expensive to feed than cows, and ideally having better genetics than the cows they replace, should produce better, bigger calves," said USDA economic research analysts in the Jan. 17 Livestock, Poultry and Dairy Outlook.
The heifer share of slaughter ran 37 percent to 37.7 percent between 2007 and 2011, but was down to 36.4 percent in the first 11 months of 2012.
"Lower shares imply more heifers are being retained for cow-herd replacement," USDA-ERS reported.
Drought-affected pastures could in 2013 result in further placement of light-weight feeder cattle into feedlots and further reducing the supply of heavy feeder cattle for placement.
"The prevalence of drought-reduced pastures over most of the central United States was thought to be a key factor affecting retention of feeder cattle for growth to heavier weights. Consistent with this logic, placements of the lightest feeder cattle in feedlots in 2011 and recently in 2012 have been above historic levels," the outlook report said.
On the flip side, the dogma of placement of heavy cattle into feedlots when feed prices are high was also the case in 2012 and will likely continue through the current corn-crop year. Placement of heavy cattle during the third quarter of 2012 was well above historic levels.
The drought affected both ends of the spectrum in the last half of 2012, with the placement of the lightest and heaviest cattle more heavily weighted on both ends than is typical, ERS reported.
The number of feeder cattle on small grains in the Southern Plains, due out in USDA's Feb. 1 cattle report, will give some indication of the potential for heavy feeder cattle placements in March.
While drought conditions will affect what's going into feedlots, feeders will no doubt be keeping an eye on challenging feed prices due to tight supplies.
Corn prices were unchanged in the January report and are forecast at $6.80 to $8 per bushel for 2013. Soybean meal was lowered slightly to $430 to $460 per ton. The agency did not forecast hay prices but noted the December price for alfalfa hay was $217 per ton, changing little from November's price but still above year-earlier levels.
In addition, negative packer margins and record-high retail beef prices could dampen rising fed cattle prices.
"It's difficult to see how fed cattle prices can go much higher except at the expense of a significant reduction in slaughter numbers," ERS reported.
U.S. January beef outlook
Production 2011 2012 2013*
Million pounds 26,195 25,917 24,805
Per capita disappearance 2011 2012 2013*
Retail pounds 67.3 57.4 55.4
Export/imports 2011 2012 2013*
Exports 2,785 2,484 2,450
Imports 2,057 2,232 2,565
Price 2011 2012 2013*
Dollars per hundredweight
Choice steers 114.73 122.86 125-134
Feeder steers 133.74 146.39 143-152
Cutter cows 68.30 77.71 77-82
Source: USDA Economic Research Service