Data on Friday are expected to show the US cattle herd at
its lowest since Henry Truman was president, and Queen Elizabeth II was
The US Department of Agriculture is expected, in a
twice-a-year cattle inventory report, to show the domestic herd starting 2013
1.8% smaller than it began last year.
That implies a herd of 89.1m head – the lowest since 1952,
and down nearly one-third on a high reached in 1975.
'Should have been
But would a decline, for a sixth year in a row, matter?
"Its impact on markets is likely to be little to none," FCStone
analyst Ryan Turner said.
"It is a report that everyone wants to see."
After all, the US cattle herd is more than a statistic. It
is wrapped up with cowboys, the great way west, and US culture and history (at
least, as perceived from abroad).
"But really the data in it should have been priced in. The
results look pretty clear already," being largely calculable from other data.
'Important for two or
At broker US Commodities, Jason Roose was not quite so
dismissive, saying that the report "will be important, but only for two or
three minutes, before we go back to trading the cash market", to which futures
are currently looking for reassurance that a revival in futures has been
Chicago live cattle for April have recovered nearly 3% since
bottoming out on January 18 from a decline fuelled by tepid beef demand and the
closure by Cargill of a Texas processing plant.
"The report will remind is that cattle numbers are tight. And
it will show just how much the impact of drought hit home, and how much cattle
numbers tightened in the north."
While the important cattle state of Texas has been dogged by
drought for four years, in states such as Nebraska, which lifted its prominence
in 2011, dryness has been a more recent problem.
'Just plain wrong'
Still, the importance, in beef terms, of a declining herd
number is muted by improving productivity.
"There was one report that just as Japan was opening back up
to US beef, our supplies of beef were falling," Mr Turner said.
"That is just plain wrong. Whether it is down to genetics,
better feeding, improved techniques, we are getting more beef per animal."
While the cattle inventory has fallen by 32% since 1975,
beef production has risen by 18%.
But there are two hopes for the report to provide more than a
headline involving President Truman.
One is that analysts don't always get it right.
In the last major US Department of Agriculture sector report,
the cattle on feed briefing a week ago, they foresaw placements as rising by
more than 4% in December, when it turned out that they in fact they fell by
While not a shocker, the number did fuel the revival in prices
of live cattle (ie those fattened for slaughter) besides undermining Chicago corn
futures, temporarily, in signalling that rationing in the face of high grain costs
was occurring in the livestock sector as well as in exports and ethanol output.
The second is the number on beef replacement heifers.
Analysts' expectations for Friday's main data are closely
grouped – apart from on the number of young cows which could potentially form
the basis of a recovery in herd numbers.
Estimates range from a year on year decline of 7.9% in beef
replacement heifers, to an increase of 3.0%.
"Analysts have vastly different numbers in this regard," a
report from Paragon Economics and Steiner Consulting said.
"Drought was a significant concern for cow-calf producers in
2012. Moreover, the spike in corn prices negatively impacted feeder cattle
values and changed the incentives for producers to hold on to their animals.
"Most analysts, however, appear to think that the impact of
the drought was not as severe."
Many commentators are in fact banking on a recovery in the
US cattle herd ahead, with JBS - the Brazil-based meat giant with substantial
North American operations – foreseeing a recovery in numbers to more than 95m
head by the end of the decade.
That will take beef output to 13m tonnes, and help meet world
demand for the protein being supported by growing affluence in developing
Whether the herd will actually recover, of course… Well,
that heifer number on Friday may provide some insight.