US cattle herd at 36-year low
UPDATE 2-US cattle herd at 36-year low amid poor profits
Published: 26 Jul 2009 16:53:50 PST
(Recasts, updates throughout, adds analyst comments, byline)
CHICAGO, July 24 - The U.S. cattle herd was at a 36-year low in June and the number of cattle being fattened at feedlots was the smallest in 10 years, government data showed on Friday, with the contraction expected to last till 2012.
Data from the U.S. Agriculture Department was expected to provide mild support to cattle futures when trading at the Chicago Mercantile Exchange resumes on Monday morning.
The herd is in the third year of reduction amid the recession, high grain prices and lingering concerns over the first case of mad cow disease in the United States in 2003.
"Cattlemen have lost money on the cow/calf side. Last year, 2008, in our estimated series, is the first year many cattlemen did not cover their cash cost of production," said Jim Robb of the Livestock Marketings Information Center.
The financial strain from high feed and fuel costs was compounded by a parched pasture, especially in the southern Plains, a key cattle producing and feeding region.
"It's mostly economics continuing the liquidation, supplemented by drought in recent years. Input costs have really pressured lots of agricultural producers, including ranchers," Robb said.
"We just started to see some relief on the cost side the last couple of months and these inventory numbers are reflecting what's happened in the last two years," he added.
USDA put the July 1 cattle on feed supply at 9.752 million head, down 5 percent from last year and the lowest July number in 10 years. The June marketing number at 101 percent of last year was considered the most supportive for cattle futures as it was at the high end of expectations.
CME CATTLE FUTURES SEEN UP ON MONDAY
"Overall we'd call the cattle on feed report neutral to slightly positive, giving the trade a 0.200 cent bounce Monday morning," said Rich Nelson, livestock analyst with Allendale Inc. "It was a surprise that the marketings came in as high as they did."
The low pace of placements continued in June with the number of cattle placed at feedlots that month down 8 percent from last year to 1.391 million head, the second lowest since the USDA began issuing mid-year data from 1973.
Live cattle futures were seen opening steady to 0.250 cent per lb higher on Monday.
Analysts noted that the cattle herd coming in slightly above the high end of expectations takes some of the bullishness out of that Cattle on Feed report.
USDA put the July 1 total U.S. cattle herd at 101.8 million head, down from 103.3 million last year. But the estimated 2009 calf crop was in line with expectations and shows cattle numbers in the United States will likely be tight for years.
Feeder cattle futures were seen opening 0.250 to 0.500 cent per lb higher on Monday, with deferred contracts rising the most due to the small herd size.
"The supply side increasingly looks supportive of prices. We're still liquidating the size of the beef cow herd. The number of replacement heifers held back on the beef cow side does not indicate any herd expansion at all," Robb said.
"We might see our first signs of herd expansion, in terms of replacement heifers in 2010, but you won't see any fundamental increase in beef production until probably 2012," Robb added.