August 24, 2011

US cattle placed on feed reach record-high 

Cattle placed on feed in the US has recorded a 22% high in July since its series in 1996.  

USDA's recent Cattle on Feed report drew comparisons with last year where severe droughts pushed ranchers into culling their herds, causing a deeper decline in the beef production market.

Overall, beef cow numbers have dropped 5% since 2007, when feed prices were still moderate, and analysts are predicting that the quantity of beef available to American consumers will continue to decline dramatically for several reasons.

Firstly, high feed prices are forcing the continued liquidation of the cow herd. Cattle ranchers are now caught between selling their cattle and buying feed to sustain their animals. Either way, it is a costly proposition.

"Grain markets remain very dangerous and any further problems with the crop could propel prices even higher," said livestock analyst Len Steiner. He anticipates record cattle prices again in 2012.

"Current high prices should provide some inducement to producers to add more heifers to the beef cow herd, but the process will be slow, and it will not have much of an impact in 2012 and 2013 due to the long production cycle for bovine animals," said Steiner.

Secondly, beef exports are up as a result of a weak US dollar. With tighter supplies from South America and very limited growth from Australia and New Zealand, cattle prices are expected to rise. A weaker US dollar in 2012 is expected to increase beef exports while limiting the amount of imported beef.

Finally, drought in the Southwest and Southeast is expected to last through fall. As the nation nears the end of a drought-ridden summer, cooler temperatures in September are expected to raise cattle prices an average US$112 to US$116 in the fourth quarter but spike early in 2012. Some analysts are predicting prices to set records with quarterly averages climbing to US$115 to US$120 and peak seasonal prices in the early spring of 2012 reaching US$125.