The furore over Zilmax, the drug promoting cattle growth which withdrawn on Friday, will have "only minimal effects" on US beef output, farm officials said, forecasting that meat supplies will be ample – for now.
The uproar over Zilmax - over which beef processor Tyson Foods unveiled restrictions two weeks ago for fears the drug can leave cattle with difficulty walking – prompted Merck, the group behind the drug, on Friday to announce a temporary suspension on sales of the product.
"This will allow sufficient time for the establishment of valid study protocols, identification of feeders and packers to participate in the audit, and creation of a third-party team to oversee this process and validate its results," Merck said.
However, the ability of cattle producers to opt for other growth promotion agents, such as Optaflexx, the bovine version of ractopamine, should limit the impact of the sidelining of Zilmax, commentators said.
Impact of ban
Paragon Economics and Steiner Consulting estimated the loss in carcass weights at less than 2%, assuming producers switch to another growth stimulant.
"According to our sources, switching from Zilmax to Optaflexx will probably reduce [cattle] weights by 6-8 pounds," equivalent to about one-third of the increase recorded for 2012.
"Live cattle futures were up about $1.20 per hundredweight for the week last week - a reasonable response, we think, to what we know at present."
Broker US Commodities said that "the positive spin" on beef and cattle price prospects "from the drop in the growth hormone Zilmax has now been muted", adding that it believed that "most feedlots will switch to other available hormones".
US Department of Agriculture analyst Kenneth Mathews said that the Zilmax furore "may have only minimal effects on beef production.
"To the extent that producers switch to another widely used [growth promotion] product or take advantage of cheaper corn to increase the amount of time on feed, the effects of the suspension on beef supplies may be mitigated."
Indeed, he outlined bright prospects for supplies of beef for the rest of 2013 thanks to a knock-on effect of a trend by feedlots in recent months of taking in for fattening heavier animals, which require less finishing time, a big advantage at a time when feed prices remain relatively high.
"It is also likely that supplies of fed cattle for the remainder of 2013 will be more than adequate, thanks to placements of heavy cattle—especially over-800- pound feeder cattle—over the last several months," Mr Mathews said.
"These heavy weight placements will be ready for market after a shorter feeding period than for the more typical lighter weight cattle placed on feed both before and during the same period, bunching supplies of fed cattle when they all go to market at the same time."
Supply squeeze in 2014?
This market dynamic looked set to last into early 2014 too, "swelling first-quarter slaughter beyond that typical with current cattle-on-feed inventories".
However, it looked set to fade, with supplies of heavier feeder cattle, for placing on feedlots, poised imminently to dry up.
"Given the large numbers of feeder cattle weighing 800 pound or more that have been placed on feed, feeder cattle of any size could become relatively scarce this fall and winter," Mr Mathews said.
Marketings of fattened cattle from feedlots, and of steer and heifer slaughter, "are expected to be lighter year over year" for the second quarter of next year, and indeed "for most of 2014".
"This scenario could be exacerbated if anticipated lower corn prices also facilitate a shift to lighter weight placements in feedlots that would tend to be finished for market later than heavier placements."