December 14, 2007

US beef companies cut production as sales remain in the doldrums

The top four US beef producers are cutting down on production as US beef sales continue to languish.

Tight cattle supplies have resulted in high cattle prices for beef companies. Cattle producers have been reluctant to take lower prices because feed prices are much higher this year.

On the other hand, abundant supplies of lower-priced pork and chicken have depressed beef sales.

The two top beef companies, Tyson Foods Inc and Cargill Inc, said they have been operating at reduced levels, while JBS-Swift & Co. and National Beef also announced cuts in production this week.

Swift announced it will reduce cattle slaughter starting next week by about 15,000 head a week. National Beef also announced a reduction of cattle slaughter by 10,000 to 15,000 head per week.

US beef companies, on average, are losing about US$45 on every head of cattle they slaughter, by some estimates.

Meanwhile, supplies of market-ready cattle have been tight as producers were reducing herds due to drought and high feed prices.

However, cattle numbers have begun to increase and greater supplies should be available in 2008.

Supplies would stay tight and prices high until April 2008, analysts said.