Downward-trending cattle slaughter means beef prices will hover at or above record levels through 2014
The number of cattle placed in U.S. feedlots in July fell 10 per cent from a year earlier and to the lowest level for July in five years, a USDA report showed last Friday.
Analysts attributed the decline to high-priced feed that hurt feedlot profits. Feedlots had fewer cattle to draw from after last year’s drought hurt crops and reduced the herd to its lowest level in 61 years.
Contributing to the slowdown in placements was quality grazing land that allowed cattle to gain weight outside of feedlots longer.
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The report showed July placements down 10 per cent at 1.722 million head, compared with 1.922 million a year earlier. Analysts, on average, expected a 1.4 per cent decrease. The placements were the smallest for any July since 1.656 million in July 2008.
Last month’s placements were “incredible” given lower cash cattle prices, and feeders looking ahead to the prospect of cheaper corn this fall, Allendale Inc. chief strategist Rich Nelson said.
“We had a huge offering of calves and feeder cattle which went into sale barns last month rather than feedlots,” Nelson said.
He said those who needed heavyweight calves bought them to finish on late-summer grass following much-needed spring rains from Texas to Kansas.
July’s sizable placement shortfall could result in a first- quarter cattle slaughter down at least eight per cent year over year versus the possible decline of six per cent that some in the industry had anticipated, Nelson said.
The downward-trending cattle slaughter means beef prices will hover at or above record levels through 2014, analysts said.
USDA’s monthly retail price data reported the average beef price in July hit an all-time high of $5.36 per lb., beating the previous record of $5.30 per lb. set in March.
Jim Robb, Livestock Marketing Information Center director, said the number of cattle that weighed 800 lbs. and over the past few months has finally declined and other weight categories were significantly under a year ago.
He said Colorado and Kansas, both with placements at 81 per cent of a year ago, stood out and reflected feedlots grappling with sustained margin losses in the feeding cattle sector.
USDA put the feedlot cattle supply as of Aug. 1 at 10.026 million head, or 94 per cent of the year-earlier total. Analysts polled by Reuters, on average, expected 95.8 per cent. It was the lowest since 9.880 million on Aug. 1, 2010.
