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Rabobank: Cow Herd to Continue Increasing Through 2020

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Herd expansion won’t slow down anytime soon according to Rabobank analysts who are projecting 1.6% to 2.2% growth in the beef cow herd in the next two to three years.

Rabobank recently published the U.S. Long-term Beef and Cattle Outlook report which outlines how expanding beef production will increase the need for export. Don Close, senior analyst of animal protein and Sterling Liddell, senior analyst of data analytics, authored the report for RaboResearch Food & Agribusiness.

The cow herd has been in expansion phase starting in 2014, after several years of declines stemming back to 1995. The most dramatic drop in cow numbers happened in 2011-12 after widespread drought through the U.S., and especially in the Southern Plains forced mass herd reductions.

Close and Liddell expect herd rebuilding to continue into 2019-20 as corn prices stay low, per capita beef consumption increases and export demand help make retention of heifers more promising.

Somewhere in 2020 to 2025 the Rabobank analysts expect increased supplies of both beef and poultry will cause negative price pressure, making it difficult for producers to justify retaining more replacement heifers.

“In the next liquidation phase, which begins in 2020-21, we project a 75% probability that the beef cow herd will remain at, or above, 30 million head through the projection period,” Close and Liddell write.

Rabobank officials only expect culling to be more intense during the 2021-25 time period if an extreme drought happens, similar to 2011-12.

More cows means more calves in the futures and Rabobank expects record high production levels by 2022.

“The renewed growth in beef production is driving things to a breaking point, where the U.S. will need to exceed the 10% production export barrier,” Close and Liddell write.

Currently in 2017, beef exports account for 10.7% of production. By the end of the year exports are projected to reach 11.4% of production.

Domestically consumption has seen recent growth after per capita consumption dropped to just above 54 lb. in 2015. Last year domestic consumption rose 3% to 55.5 lb. per capita. Consumption in the U.S. is estimated to reach 58 lb. per capita, roughly a 4-5% increase.

With domestic consumption not able to keep up with production increases, exports will become more important and imports should stay lower. A growing middle-class in China and Southeast Asia are adding more protein to their diets which should aid in moving beef exports.

Rabobank is projecting the U.S. to be a net beef exporter from 2017 to 2025.

Because of more beef being exported, U.S. beef producers can expect more volatility in the future.

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