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US dryness starting to erode cattle prices - USDA

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The US Department of Agriculture heightened concerns over the impact of dryness on cattle markets, blaming renewed fears for pasture conditions for "causing consternation" among ranchers and eroding prices.

Cattle prices, which broker US Commodities on Monday noted "came under a great deal of selling pressure last week" in both cash and futures markets, "may have reached a temporary peak", the USDA said.

The caution reflected the effect on the spread of undue dryness which - besidessending corn prices soaring on Monday - has curtailed, and even reversed, a trend of herd rebuilding which had offered support to prices.

A lack of moisture left 60% of the Midwest, 73% of the High Plains and 74% of the US South suffering abnormally dry or drought conditions as of last Tuesday, according to official data.

Latest USDA pasture condition data, which will be updated later, showed the proportion of US pasture in "good" or "excellent" condition at 41% as of June 10, down five points in a week.

A year before, the figure was 53%, in line with the long-term average.

'Causing consternation'

"Dry conditions are spreading to the north and west and expanding in the south eastern US, causing consternation among crop and livestock producers as far north as the Corn Belt and increasing the flow of lighter cattle off pastures," USDA analyst Rachel Johnson said.

The greater availability of cattle - augmented by "drought-induced" exports from Mexico, running at a higher rate than a year before – has begun to undermine prices, particularly of lighter animals.

"Prices/markets for lighter and younger calves are becoming unsteady at best, reflecting the rapidly deteriorating summer pasture conditions," Ms Johnson said.

In another sign of a fresh reluctance to rebuild herds, cow slaughter has increased, if remaining below year-ago levels, when many areas of the South were suffering even drier conditions than now.

'Temporary peak'

The comments echo those in a report earlier this month from Paragon Economics and Steiner Consulting which raised the alarm over rainfall levels for livestock markets.

The groups on Monday restated concerns, saying that while many parts of the US received rain over the weekend, the "longer-term situation still shows precipitation lagging the normal pace, meaning drought conditions of varying degrees still exist from Kansas and Nebraska in the west to Indiana in the east".

The USDA's Ms Johnson also forecast that a rise in beef prices - which for choice cuts reached $198 a hundredweight, just short of record highs – may also stall, with the strong headline number concealing relative weakness in prices of lower-value cuts.

"Processing beef prices may have reached a temporary peak and could decline over the next quarter," she said, adding that the longer-term outlook for beef overall "remains positive", due to falling inventories.

By Agrimoney.com

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