News Releases

Date: 8/23/2010

Title: Feeder Cattle Supplies Tight for Foreseeable Future

DENVER - Currently forecast corn and soybean prices—combined with feeder cattle prices near historical highs—will result in fed cattle breakeven prices above current levels, according to the latest edition of USDA’s Livestock, Dairy and Poultry Outlook Report.

Fed cattle prices at or above these levels could be difficult to achieve in the face of competition from cheaper poultry and a slow-paced economic recovery through the remainder of 2010, although lower pork supplies would provide positive price support. Small or negative cattle-feeding margins would result in some negative pressure on feeder cattle prices, adding to existing reluctance among cow-calf
producers to expand cow herds.

National Feeder and Stocker Cattle Summaries (SJ_LS850) indicate that feeder cattle sales have been well above year-earlier levels. At the same time, feeder cattle supplies outside feedlots, down by almost 3 percent, are the lowest since the series began in 1996. Further, the latest Cattle On Feed report released July 23 indicated that the ratio of over-700-lb June feeder cattle placements to total placements was lower than last June's and almost the same as in 2008. Should these placement levels continue, the stage is set for heavy fed cattle marketings at the end of the year and into the first and second quarters of 2011.

With almost a million fewer feeder cattle outside feedlots on July 1, 2010 compared with 2009, cattle appear to be "pulled forward" (placed on feed earlier than would be considered typical) to take advantage of the current profit potential and to utilize feedlot pen space. Continued increases in grain prices could counteract the pulling forward of feeder cattle placements, which could be supportive for feeder and later fed cattle prices.

Mexico has been rebuilding its cow herd after a series of extremely dry years. As a result, Mexico should be in a good position to export feeder cattle to the United States. This will offset anticipated reductions in exports of feeder cattle from Canada where large numbers of cows going to slaughter will reduce this and next year’s calf crops, and thus, future feeder calf supplies.

View the entire report, including an analysis of the impact of the declining U.S. cow herd.

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