October 11, 2010

Surging US corn prices result in most expensive beef since 1980s

The US cattle herd in July was the smallest since 1973 and the number of breeding hogs last month was near the lowest ever, according to government data. Corn futures jumped to a two-year high today and the price of the main feed ingredient is more than 70% above the 10-year average.

US per-capita beef supplies next year will be the lowest since 1952 and pork the smallest since 1976, industry researcher CattleFax said. Hog futures will rise 14% by July and cattle may gain 3.6% by April, according to analysts.

"If grain prices go up, then meat prices are going to have to move up," said Mark Greenwood, vice president at AgStar Financial Services Inc. in Mankato, Minnesota, who oversees US$1 billion in loans and leases to the hog industry.

Livestock prices failed to keep pace with third-quarter rallies by as much as 40 % for corn and wheat, as too much rain and heat eroded US yields and drought hurt crops in Russia and Europe. Cattle futures rose 11% in the period and hogs dropped 8.3%.

Corn soared to the US$0.45 maximum limit allowed by CBOT to US$5.73 a bushel, the highest price since September 2008, after the US Department of Agriculture on October 8 cut its harvest forecast for the second time in two months. Wheat and soy futures also rose.