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 cattle.

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 losses'

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".

'Dim prospects'

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 that large'

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.