CIH Beef Margin Watch: January


Cattle futures rallied sharply over the second half of January while the corn market traded steady. USDA’s NASS released the biannual Cattle Report which was largely in line with industry expectations. All cattle and calves as of January 1 totaled 87.157 million head, down 1.9% from a year ago and the lowest cattle inventory since 1951. Beef cows were estimated down 2.5% from last year to 28.223 million head, and the dairy cow herd at 9.357 million head would be 0.4% lower than 2023. The estimated calf crop for 2023 was 33.593 million head, down 2.5% from 2022. USDA estimated total beef cow replacements down 1.5% from last year at 4.858 million head, but also revised last year’s number to 4.93 million head from 5.164 million previously, indicating a 10% inventory drop between 2022 and 2023. USDA estimated total Cattle on Feed as of January 1 at 11.93 million head, up 2.1% from last year with December placements of 1.704 million head down 4.48% from 2022. Cattle on feed more than 120 days increased 223,000 head from December to 4.192 million head, up 12% from a year. Despite this, the smaller calf crop and lower beef replacement figures portend a large drop in fed slaughter once the percentage of heifers in the slaughter mix reverts to normal. USDA also pegged total year-end frozen beef inventories in Cold Storage at 485.1 million pounds, down 11% from last year and 5.3% lower than the five-year average. Beef inventories increased 6.1% from the previous month compared to an average of 1.8% over the past five years which was considered bearish. Our clients have benefited from being positioned for a recovery in cattle futures while maintaining protection on their inventory.



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