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4 years ago
U.S. cattle prices set more records as supply shrinks
October 23, 2013 / 9:12 PM / 4 years ago

U.S. cattle prices set more records as supply shrinks

By Theopolis Waters
    CHICAGO, Oct 23 (Reuters) - Slaughter cattle in Texas and
Kansas set the highest price on  record Wednesday when they
traded at mostly $132 per hundredweight, the result of a smaller
herd and rising beef prices, analysts and economists said.
    Cattle prices have been trending higher for several years as
droughts and high feed prices have caused producers to pare
herds. The $132 paid by beef packers on Wednesday compares with
the previous record of $130 during the week ended March 2, 2012,
according to analysts and economists.
    "There are not enough cattle," University of Missouri
livestock economist Ron Plain said of the higher prices.
    Packers and feedyards are drawing from a smaller pool of
cattle after ranchers downsized the U.S. herd to the smallest in
61 years. Prolonged dryness hurt crops that last summer pushed
feed and hay costs to all-time highs.
    Higher cattle prices have been good news for feedlots. Those
prices and cheaper corn due to a huge U.S. corn harvest,
narrowed their losses while offsetting costly feeder cattle.
    That chance for profitability has feedlots in better shape
to buy yearling cattle for fattening before sale to packers such
as Cargill Inc and Tyson Foods Inc.
    In September, on average, feedlots lost $34 per head of
cattle sold to meat companies. That compares with a loss of $92
in August and extends their streak of losses to 29 months, as
calculated by the Livestock Marketing Information Center in
Denver, Colo.
    Fewer cattle resulted in less meat, lifting the price for
choice beef at wholesale on Wednesday morning to $200.68 per
cwt, according to U.S. Department of Agriculture data.
Wednesday's choice beef value eclipsed the June 18 price of
$200.24.
    "Beef prices in grocery stores have been at record highs the
past two months, which means packers can pay more for cattle,"
Plain said.
    The average retail beef price in August, the latest that is
available, was a record $5.39 per lb, surpassing the July record
of $5.36, according to the USDA's Economic Research Service.
    Rich Nelson, chief strategist for Allendale Inc in McHenry,
Illinois, partly attributed the rise in beef prices to grocers
and restaurants stocking up after they curbed purchases during
the 16-day government shutdown in October, when they feared
consumer spending would drop.
    "During the shutdown a lot of end users were not buying
beef. They were trying to hold back a little bit," said Nelson.
"This is all coming together at the start of a big decline in
supply, which will last through early second quarter 2014."
    
     PACKER MARGINS SUFFER? 
     While feedlots are earning profits on cattle, the beef
companies that buy them and process them into meat are not,
analysts said.
     U.S. beef packers on Wednesday were estimated to lose 
$41.55 per head of cattle, compared with a loss of $48.20 on
Tuesday and a loss $43.55 a week ago, according to
HedgersEdge.com, a Colorado-based livestock analytics firm.
    Elaine Johnson, analyst with CattleHedging.com, said packers
may not be losing quite that much money as different purchasing
methods may minimize losses.
    Also, beef exports and sale of hides and non-meat items,
such as internal organs, could help processors mitigate losses,
she said.
    "If the packer truly is absolutely getting crushed on his
margin, he is going to cutback his kills," Johnson said.

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