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Dwindling Cattle Supply Favors Pounds & Prices

Article-Dwindling Cattle Supply Favors Pounds & Prices

Tight cattle supplies result in higher prices
There were 11 million head on feed Oct. 1. That’s 3% less than a year earlier. The average guess ahead of the report was a 2% decline.

Anyone wondering whether the industry has any more aces up its sleeve in terms of cattle to pull forward received a definitive answer in last week’s monthly Cattle on Feed report.

September placements were down 19%, compared to the average pre-report estimate of 15% lower. That’s on top of August placements that were 11% lower year-to-year and July Placements that were 10% less.

For the record, there were 11 million head on feed Oct. 1. That’s 3% less than a year earlier. The average guess ahead of the report was a 2% decline.

Another Look: Cattle On Feed, Placements, Marketing – All Lower Than Expected

Marketings in September of 1.6 million head were 12% less than a year earlier. The average estimate ahead of the report was a decline of almost 11%.

“Higher corn prices this year are tempering feeder cattle demand and bigger questions remain about domestic and export beef demand,” says Derrell Peel, Oklahoma State University Extension livestock marketing specialist. “Still, tight feeder cattle supplies will continue to dominate the cow-calf and stocker sectors, keeping calf and feeder prices very high.”

Plus, Peel adds that import data for August and September suggest that imports of Mexican calves into the U.S. will be sharply lower through the remainder of this year as well as 2013.

According to Peel, cow-calf producers are witnessing the expected impacts of a tight cattle supply situation:

  • Calf prices are currently $20-$25/cwt. higher than the same time last year.
  • Cull cow prices are currently $10-$12/cwt. higher than a year ago, which analysts mostly attribute to continued strength in the hamburger market and decreased cow slaughter.
  • Total cow slaughter is down 4.8% for the year to date while beef cow slaughter is down 13% year over year.

“Prices for all classes of feeder cattle are expected to gain strength in 2013 as reduced cattle inventories lead to reduced feeder cattle supplies and increased demand for feedlot placements and replacement heifers,” explain Economic Research Service analysts in the October Livestock, Dairy and Poultry Outlook. “Retention of replacement heifers will further reduce feeder cattle supplies. However, it is likely that beef cowherd expansion will be limited until feed grain supplies increase and prices decline to levels that will allow at least the anticipation of positive margins for cattle feeders, packers and retailers.”

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