Cattle on feed up 1%

Cattle numbers were within trade estimates for the report.

Dan Grant

Published: Aug 17, 2012

Cattle prices may not jump any time soon.

USDA on Friday estimated the inventory of cattle on feed as of Aug. 1 was 10.65 million head, up 1 percent from a year ago.

The U.S. cattle herd is as its lowest level since the 1950s. But beef supplies remain high as producers continue to liquidate animals due to lack of feed and high feed prices caused by the drought.

“There probably is a slight bearish tone to the report,” said Stan Bevers, economist for the Texas AgriLife Extension Service. “The drought is forcing cattle into the feed yards, but it’s not as bad as everyone thought it would be.”

Marketings of fed cattle during July totaled 1.91 million head, unchanged from a year ago. Placements in feedlots during July totaled 1.92 million head, down 10 percent from last year.

Bevers predicted cattle prices could be range-bound near-term but, long-term, he is bullish.

“Short-term, we have to work through the numbers we have now,” he said. “Later on, this deal is going to get awful, awful tight.”

Futures prices reflect the situation. Cattle prices last week traded near $1.20 per pound but April futures were about $1.35 per pound.

“There is talk we could get to $1.40 per pound in April or May of next year,” Bevers said. “But that’s all premised on whether the American consumer is willing to pay for it.

“The advantage we have now (in the beef sector) is all meat protein is pretty expensive,” he continued. “We’re all facing the challenge of higher feed costs.”

Beef exports remain strong but recently could reflect weakened demand due to higher prices and a stronger dollar.

U.S. beef exports through May were 5 percent above last year’s record. But beef exports in June were down 11 percent from the previous year.

“It doesn’t seem export customers are quite as inelastic as American consumers,” Bevers said. “(Export customers) seem more willing to pay a lot higher prices.”

All customers will be put to the test in coming months, though, as herd numbers continue to diminish and prices are expected to escalate.

“We’ve got challenges ahead of us,” Bevers said. “Here in cattle country we realize we’ve got higher feed prices for at least the next 12 months.”

The feed situation is causing a shift in cattle feeding locations. Cattle placements in Texas, the cattle-feeding capital of the U.S., are down 25 percent from a year ago while placements in Nebraska increased 5 percent.

The shift is occurring due to feed availability, Bevers added.

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