story by Kim Souza
While beef packers like Tyson Foods and Cargill were spared any major setbacks from meat inspector lay-offs following the federal sequestration budget cuts, they did lose a forecasting tool when the U.S. Department of Agriculture suspended its July Cattle Report.
The semi-annual report surveyed the head count of the nation’s herd and provided the first glimpse of the calf numbers, which is deemed a forecasting tool used by cattle marketers, packers and producers that are price sensitive, said Travis Justice, spokesman for the Arkansas Beef Council.
“It’s unfortunate, because it was a mid-year check-up following the January report and it provided a snapshot view of the state of the industry. Smaller Arkansas cattlemen may not directly miss the report, but the analysts, feed yards and packers will have less visibility in forecasting,” Justice said.
Justice said local cattlemen rely on those services up the chain so there is an indirect impact coming at a time when the industry itself is volatile.
The July Cattle Report was one of several agriculture accountings to be suspended (See the list at bottom of this story.). The USDA said the decision to suspend the reports was not made lightly, but it was nevertheless necessary, given the funding situation.
Derrell Peel, a livestock marketing analyst at Oklahoma State University, said the decision to suspend the July Cattle Report means the industry will have no indication of what is happening with cow liquidation, heifer retention or the size of the calf crop until early next year.
“There is much uncertainty about additional drought impacts this year on top of everything the beef industry has been through in recent years. The formidable challenges of minimizing expected decreases in beef production; maintaining feedlot and packing infrastructure; and rebuilding the cow herd all depend on having timely information on cow herd inventory changes and feeder supplies. I can’t think of a worse year in two or three decades to not have the mid-year inventory information available,” Peel notes.
Tyson Foods chose not comment on its beef business, while Cargill said its procurement team does not see the report as essential to its ongoing operations.
Justice said packers in general will have to rely on other tools and perhaps purchase independent research if they want the mid-year clarity as they forecast future supplies. The cattle supply is crucial with respect to keeping plants running at optimal efficiencies. He said larger packers likely have analysts in-house to assess the data on their behalf.
Peel says the cattle herd, already at an historic low, is likely to continue shrinking this year as drought stress is evident in reduced reproductive performance – cows not producing calves in addition to higher calf mortality which is impacting an already small 2013 calf crop.
He said it is unknown if cattlemen plan to increase heifer placements or hold them back. And what happens between now and June will likely determine the overall herd inventory for the remainder of the year.
“After seven years of continuous liquidation, the question of whether the beef cow herd is liquidating or stabilizing in 2013 has significant implications for several years. Unfortunately, there will be no data to answer these questions until 2014,” Peel said.
Justice said the declining herd has dramatically impacted his agency budget, which is based on the head of cattle, which are sold. Fewer cattle marketed in the state means less income.
“Last year the state’s cattle marketings declined nearly 10%, which is a huge shift from the normal 1% to 3%. Our budget has steadily declined over the past three years, and 2012 was the lowest budget seen in our 25-year history,” Justice said.
He expects the numbers will get worse before they improve, especially if cattlemen retain heifers in hopes of starting to rebuild in the next year or so.
Justice expects the cattle supply to dip another 5% this year. Two of the nation’ largest packers have idled plants in recent months because of too few cattle and lackluster consumer demand.
On Tuesday, (April 9) Cargill’s red meat division reported a difficult quarter which helped to swing the diversified agriculture company to a 42% drop in earnings. Cargill management cited high feeding costs and tight cattle supplies as reasons for the negative results. The company’s beef processing plant in Plainview, Texas, was idled in February because of the tight cattle supply brought about by years of drought in Texas and Southern Plains states.
Cattle feeding margins improved $30 per head last week following a $1 per hundredweight increase in cash fed cattle prices. Average losses are now under $75 per head, according to the Sterling Beef Profit Tracker.
Beef packers saw their margins decline nearly $10 per head last week, putting losses at $45 per head slaughtered. Packer losses have ranged from $30 to $40 per head in the past two months, according to Sterling.
USDA Suspended Reports
Catfish Feed Deliveries and Catfish Processing
July Cattle Report
Potato Stocks Reports
Non-Citrus Fruit, Nut and Vegetable Forecasts and Estimates
June Rice Stocks Report
Hops and Hops Stocks Estimates
Milk Production Reports including Production, Disposition and Income
June farm stocks for Austrian Winter Peas, Chickpeas, Dry Peas and Lentils
July acreage forecasts for Austrian Winter Peas, Dry Edible Peas and Lentils