December 3, 2007

Downward pressures on US cattle prices

The US cattle and beef sectors are currently responding to downward pressures, which are partly seasonal, but also from more abundant, lower priced poultry and pork, according to Meat and Livestock Australia.

The price declines, along with high feed prices and the growing prospect of reduced winter wheat pasture available for fall and winter grazing are also affecting feeder cattle prices.

Although still at a historically high at US$95/hundredweight (cwt), and almost US$10 above the June 2007 low, there are a number of indications that fed cattle prices could continue to drop.

These include falling pork and poultry prices, the rapid rise in the percentage of cattle grading USDA Choice or better and record dressed weights.

The decline in wholesale beef prices since reaching their highs in April 2007 has been twice as much as the fall in fed cattle prices over the same period. This implies significant falls in packer revenues and further pressure for a drop in fed cattle prices.

Cattle price falls are likely to prove temporary, with rising prices expected beyond the first quarter of 2008, due to falling cattle supplies, easing competition from pork and poultry, increased consumer spending and a lift in beef exports to North Asia and Mexico.

The Steiner Consulting Group, are forecasting a 5 percent rise in fed cattle prices in 2008, a 9.5 percent rise for pigs and 5.3 percent for poultry. Also of interest to Australian exporters, 90CL cow beef import prices are forecast to rise by 9 percent in 2008, to 146.6US cents/lb CIF, due to a recovery in demand for grinding beef and falling US cow beef supplies.