January 28, 2010

US cattle herd falls to new low on climbing losses

The US cattle herd may have shrunk to the smallest size since 1958, as mounting losses during the recession encouraged beef and dairy producers to cull their cattle.

Wholesale choice-beef prices averaged US$1.4071 per pound last year, the lowest level since at least 2004, as US unemployment rate rises and meat demand weakened.

Corn jumped to a record US$7.9925 a bushel in 2008 on the CBOT, and prices averaged about US$3.79 last year, the third-highest annual average since at least 1959.

There is not much incentive in building cattle herds, as the cost of production have increased in the past two years while beef and milk prices have declined, said an analyst.

Futures prices for feeder cattle averaged 96.821 cents per pound last year on the Chicago Mercantile Exchange, the lowest level since 2003. Feeder cattle futures for March settlement rose 0.2% to 98.975 cents per pound on the CME on Tuesday (Jan 26).

Slaughter-ready cattle futures for April delivery dropped 0.9% on Tuesday to 89.325 cents per pound.

Cattle ranchers in the southern Great Plains lost about US$34 per breeding cow last year, following losses of about US$18 a head in 2008, according to an expert.

US beef production may total 25.45 billion pounds in 2010, which would be the smallest amount since 2005, said the expert. The USDA forecasts output at 25.58 billion pounds.

Beef production this year is not expected to be the smallest since 1958 because the average animal processed now weighs twice as much.

The number of young female beef cattle held back for breeding in the US may have fallen to 5.45 million animals, down 1.4% from 5.526 million a year earlier, according to an average analyst estimate.

Dairy farmers may be holding back 4.313 million young replacement cows for breeding, down 2.2% from 4.41 million at the same time last year, according to the average analyst estimate.
 

The dairy herd is shrinking partly because of industry-funded cow culls last year aimed at supporting prices which went pit-bottom. The Cooperatives Working Together programme had removed about 252,000 dairy cows from production since December 2008.