There is no end in sight for the run of feedlot losses which
has already lasted two years, despite the prospect of lower feed prices, US
farm officials said, cautioning over the threat of further drop in prices of fed
The US Department of Agriculture warned that prices of fattened
cattle, already down some 7% this year as measured by Chicago's benchmark April
live cattle contract, could have further to fall given a back-up of animals
close to being ready for market.
The number of cattle on feed for more than 120 days is at
the second-highest on records going back 17 years, despite a downturn in
placements last autumn attributed to higher feed prices.
"This suggests that there are still cattle that should come
to market in sufficient numbers to exert downward pressure on fed cattle
prices, and likely on wholesale [beef] cutout values as well," USDA analyst
Rachel Johnson said.
'Continued cattle feeding
Even the prospect of lower grain prices ahead, as better
conditions foster a pick-up in US crop production, will not allow feedlots to
break losses stretching back to March 2011.
While lower grain costs might lower their part of the cattle
production bill - which the USDA pegged in the "mid-$130" per hundredweight
range, ahead of the $127 per hundredweight for selling cattle in Texas on
Friday – feedlots will face higher costs for buying animals to fatten up.
"Feeder cattle prices are expected to rise, and will largely
offset expected lower 2013-14 corn prices," Ms Johnson said.
The rise in feeder cattle prices "could lead to continued cattle
feeding losses into 2013".
The USDA forecasts corn prices tumbling to average $4.80 a
bushel over 2013-14, from $6.75-7.65 a bushel this season, thanks to a harvest
seen hitting a record this year as US drought eases.
However, this is likely to prompted a double boost to feeder
cattle prices, in prompting demand not just from beef producers, with reduced
feed bills, but from ranchers wishing to rebuild herds cut back during drought
which, in some southern areas, has now lasted two years.
Currently feeder cattle prices are also on the decline,
falling 13% so far this year as measured by Chicago's benchmark April futures
contract, reflecting drought conditions which Ms Johnson highlighted have "not
completely alleviated" over Plains states such as Kansas and Texas.
"Declining prices for heavy feeder cattle may reflect the dim
prospects for near-term cattle feeding profits," Ms Johnson said.
'Never seen shipments
This year's decline in cattle prices has also been
attributed to cutbacks in slaughter rates likely as government cutbacks take
hold, with the USDA proposing its meat inspectors will take 11 days of unpaid
leave between July and September in an effort to balance the books.
The price drop continued even after the USDA on Thursday unveiled
bumper beef export sales of 31,500 tonnes – 16,700 tonnes to Japan, despite
concerns over the impact of the weakening yen on the country's import demand.
"I have never seen weekly shipments that large," Jerry
Stowell at Country Futures said.
The figure appears to be the biggest for at least a decade.
"Packer margins are the best we've seen for months as well,"
he added, reaching a positive $10.50 a head, up from $3.85 a head a week ago,
Hedgersedge said on Friday.
"However, right now futures are more concerned about things
like meat inspection and domestic demand, it appears," Mr Stowell added.