December 25, 2010

 

US livestock prices surge despite high feed costs

 

 

US livestock markets in the past months have ignored soon-to-be rising feed costs, with hog and cattle producers rising sharply before the Christmas holidays.

 

Hog futures are up from US$68 per hundredweight in early November to US$79 on Thursday (Dec 23), mostly on the strength of tight supplies and strong domestic demand.

 

Cattle are also doing well, fed by an influx of the same investment funds that have fueled grain prices since September.

 

Feeder cattle, those six months or older bought for feedlots, traded Thursday (Dec 23) at a 27-month high of US$123 per hundredweight, up from US$108 in October.

 

Live cattle, those headed for the slaughterhouse, have risen from US$98 per hundredweight in late October to US$108 this week.

 

Corn closed up 5 cents a bushel to a two-year high of US$6.14 Thursday on CBOT, which normally would be bad news for livestock producers who use corn for feed and whose sales generate up to US$10 billion for the Iowa economy.

 

A big booster of beef prices has been a 22% increase in U.S. exports in the 12 months ending in October, the US Meat Export Federation reported.

 

"You don't often see corn and livestock prices going up at the same time," Iowa Secretary of Agriculture, Bill Northey, said on Thursday (Dec 23). "Demand has definitely been strong for beef and pork."

 

Cattle and hog producers are enjoying their first profitable year since 2007, in part because their animals are eating corn priced below US$4 per bushel. But they worry that once the more expensive corn starts selling above US$5 per bushel on the markets, their margins will shrink.

 

Beef and pork producers have been reducing their herds this year. US cattle-on-feed numbers are the lowest since the early 1970s, and both the national and Iowa hog herds are down at least 3% from last year.

 

Wholesale prices for beef and pork have risen this year, with hamburger and bacon prices up more than 20% and roasts and choice steak wholesale prices gaining 17%-18 %.

 

Through November, ground beef and roast supermarket prices were up 5% from the same month last year, and choice steak was up 7%.

 

Pork prices rose more during the same 12-month period through November, with pork chops up 10%, hams up 9% and bacon prices, stimulated by a shortage of pork bellies this year, gaining 34%.