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Cattle Crossroads: Feedlots Could Feel Further Squeeze

25 September 2014

US - Beef markets appear to be at a crossroads in the US, with one possible route bringing tough times for the feedlot sector.

This is unless herd rebuilding efforts begin to take effect and ease supply concerns, an Illinois agricultural economist has stated.

Feedlot margins could be squeezed if feeder cattle values lift further, according to Dr Paul Peterson, Department of Agricultural and Consumer Economics.

But the current assessment of expansion leaves an ‘unclear’ picture.

In an extension newsletter, Dr Peterson explained that Geography is a key factor.

“Areas that have received moisture and have seen grazing conditions improve appear to be taking the first steps toward bumping up production,” said Dr Peterson.

“Areas that have not been so fortunate weather-wise are still trimming herds in an effort to hang on until conditions improve.”

Further pressure is expected to come from rival meats as a reinvigorated pig and poultry sector overcome production problems.

Detailing an ‘unexpectedly’ tight pork and poultry sector, Dr Peterson said: “Porcine epidemic diarrhea virus (PEDv) has reduced hog numbers, while production issues have limited broiler expansion.”

Meanwhile, high prices at the consumer end have been supported.

Similarly, importers of US beef have ‘shrugged off’ higher prices, meaning exports have been consistent with recent years.

The decline in US cattle production was reiterated in last week’s cattle on feed report.

Despite being slightly bearish due to higher placements than expected, placements, total cattle and marketings were all down.

This follows a trend of lower feedlot numbers for over two years and 29 consecutive weeks of slaughter being below year ago levels, Professor Ron Plain and Scott Brown, University of Missouri highlighted.

Further north, recent Canadian government figures show no let-up in the decline of cattle numbers where, as in the US, supplies are 'historically tight'. 

This is according to North Dakota State University livestock economist Tim Petry outlining the likelihood of high prices prompting herd rebuilding where moisture conditions permit. 

"Beef cow slaughter is down 17 per cent for the year and about 25 per cent during the last couple months," he said.

"Fed heifer slaughter declined 8.5 per cent so far this year and the number of heifers on feed on July 1 was down 5 per cent."

Michael Priestley

Michael Priestley
News Team - Editor

Mainly production and market stories on ruminants sector. Works closely with sustainability consultants at FAI Farms


Top image via Shutterstock

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