The question should not be when will producers start rebuilding the herd, it should be when will producers stop liquidating.
Every three months the USDA survey of feedlots with +1000 head capacity tells us not just the total inventory of cattle but also the composition of that inventory by sex. Fewer heifers in the mix imply herd rebuilding is under way, and the other way around. As of October 1, USDA pegged the inventory of heifers on feed at 4.635 million head, 60k head (+1.3%) more than a year ago. Heifer inventory as of April 1 was 1.7% lower y/y and there was some hope/expectation that inventories would continue to decline y/y during summer and fall months.
That has not happened, suggesting that producers continued to send heifers into feedlots rather than hold them back. Because the supply of cattle on feed changes over time, it is also good to run a ratio of heifer numbers vs. total inventory. Normally during times of herd rebuilding the ratio will decline, that was the case in 2004‐05 and then again in 2014‐15. The ratio of heifer inventory to total on feed supply as of October 1 was 40%, matching some of the record levels from 20 years ago. At this point the question should not be when will producers start rebuilding the herd, it should be when will producers stop liquidating.
Source: Daily Livestock Report - Steiner Consulting Group
The Daily Livestock Report provides a one-page summary of news, prices, fundamental indicators, and trading activity on CME's Livestock Complex. Daily illustrations of supply and demand factors help you learn to track the markets and anticipate price trends.
