US cattle industry holding on through pork "train wreck"

The US cattle sector is being battered by a "train wreck of mass proportions" in the pork industry, and there isn't an end in sight, a cattle industry economist said Friday (August 14).

"It's killing us," Greg Doud, agricultural economist for the National Cattlemen's Beef Association, said Friday about the low pork prices.

Doud spoke to cattle producers and traders at the 23rd annual Flint Hills Beef Fest here and said pork was flooding the meat market. The extra meat was pressuring beef and cattle values, he said.

It's impossible to examine the beef and cattle market in a vacuum, Doud said. Many producers try, but they do so at their own financial peril since the meat markets are inter-related.

Lower-priced beef and cattle markets have meant that cattle producers have lost US$7 billion since December 2007, and the industry is in bad financial straits, he said.

Now, exports are down, the pork industry is producing more pork than can be consumed and exported under current market conditions, and the gap between hog and beef carcasses is at record levels. This results in lower fed cattle slaughter and lower prices at the feedlots.

Given the basis between the cash price of US$82 and the August futures contract, which settled Friday at 84.65 cents a pound, many in the cash market expected fed cattle prices this week to be around US$83 or US$84. Doud and others at the Beef Fest said market's inability to narrow the basis could mean cattle are backing up in the feedlots as packers cut kill rates.