U. S.-fed cattle supply up, still historically low

The number of cattle being fattened in U. S. feedlots rose in November, but the tally is still near a historical low due to concerns the weak economy will hurt beef demand, analysts said.

“Cattle-on-feed numbers grew seasonally from November to December, but the number of cattle-on-feed will be one of the lowest levels since 1996,” Bob Price, president of North America Risk Management Services Inc., said in a report.

“Cattle feeders are reluctant to place cattle (at feedlots) in the current uncertain economic environment and with the large equity losses in the cattle-feeding business over the past two years.

“The supply side of the cattle market should remain below the five-year average for the next several months. However, feeder cattle supplies outside of feed yards are above last year, and the drop in feeder cattle and corn prices is providing some potentially profitable feeding opportunities,” Price said.

Corn futures at the Chicago Board of Trade have slumped 50 per cent from a record high of $7.65 per bushel in June amid a sell-off in commodities and financial turmoil in the United States.

Analysts agreed that a sharp decline in wheat prices led to a large number of cattle being grazed on pastures.

“We believe feedlot operators pushed comparatively large numbers of calves and yearlings back to pastures,” said Dan Vaught, livestock analyst with Wachovia Securities in a report. “Again, wheat prices are far below those seen last autumn and the autumn breakdown in deferred live cattle futures probably caused this shift.”

Marketings during November also saw a large decline, but this was due to two less marketing days this year. Estimates ranged from 87.2 to 92.6 per cent of a year ago.

“The huge reduction (in marketings) was largely caused by the two-day calendar shift associated with 2008’s status as a leap year, since last month had two fewer workdays than did its year-ago counterpart. As pointed out in the past, annual shifts in the number of workdays tend to cause a four to five per cent per day change in the monthly marketings total,” Vaught said.

Analysts also noted there were fewer cattle placed at feedlots previously that would be due to be marketed in November. Some of this can show up in the number of cattle-on-feed for 120 days or more.

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