June 30, 2008

The number of cattle in US feedlots are shrinking with the count at 10.8 million head as of June 1, down 3 percent and 4 percent from May and a year ago respectively.

Cattle marketing in May rose 3 percent on-year to 2.14 million head. However, cattle placements have failed to keep pace with 1.899 million head placed in feedlots during May, down 12 percent from 2007.

The drop in cattle placement was worse than what analysts had expected, implying lower than expected fed cattle supplies in late 2008.

The cost of producing fed cattle spiralled 56 percent from 2005, with feedlot costs accounting for 40 percent of the costs of a finished animal compared to 28 percent in 2005, according to Cattle Fax.

The recent Midwest floods have also damaged crop prospects as grain prices jump to a new high, which would put more pressure on the livestock industries. The combined pressures of rising input costs and limited ability to pass the costs to consumers mean that meat production have to be reduced to restore viability to livestock feeding industries.

In response to high grain prices, the US feedlot industry has taken to place heavier feeder cattle in their feedlots. The number of cattle weighing less than 272 kilogrammes is declining while those weighing more than 318 kilogrammes are on the rise.