September 3, 2007

 

US cattle feedlot production down due to ethanol-inflated corn prices

 

 

Cattle feedlots in the US are on a bumpy ride between the way things were and the way they will be, and the consumer will be paying.

 

Steve Amosson, Texas Cooperative Extension economist said ethanol production has sent some "convulsions" in the cattle industry due to higher grain costs.

 

The impact of higher costs to put pounds on the cattle is obvious in the latest US Department of Agriculture (USDA) feedlot report.

 

The number of head on feed August 1 dropped by 5 percent from 2006 in feedlots that can hold 1,000 head or more. The number of cattle put into feedlots during July was reduced by 17 percent from last year, the smallest amount since records started in 1996.

 

The cattle that are in feedlots are going heavier, around 800 pounds instead of 500 or 600, because it's cheaper to put pounds on by grazing them instead of feeding them corn made expensive by ethanol production.

 

All the reduction in placement was for cattle weighing less than 800 pounds, according to the USDA report. The number weighing less than 600 pounds was down by almost 37 percent.

 

At least some local feedlots are operating along the same lines.

 

Roger Allen, controller of Quality Beef Producers in Wildorado, said placements from customers and auction barn buys are down, but there will be an influx of cattle soon.

 

The hope is that cattle that went to summer pastures at 500 pounds will come back weighing nearly 800 pounds, he said.

 

Improved weather has made that possible.

 

Jim Gill, market director for Texas Cattle Feeders Association said grass have already started growing and that it can be cheaper than feeding corn -- one reason why cattle placements are down.

 

In the future, the high cost of corn will push prices for light calves down to compensate for the extra expense, Amosson said. But with placements down by 600,000 head nationally over two months, the smaller supply of beef in the future will eventually make prices higher through the rest of the supply chain.

 

The slaughter of cows averaged almost 12 percent higher than last year and 2006 slaughter was ahead of 2005 by 18 percent, according to the USDA report. That means rebuilding the supply will take several years of raising heifers to motherhood.