U.S. Cattle Feedlots May Face Losses On High Feed Costs

Wells Fargo & Co. examines supply and demand in the beef industry.

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U.S. cattle feedlots will have “slightly negative margins” this year amid high costs for livestock feed, says Michael Swanson, an agricultural economist at Wells Fargo & Co.

The U.S. herd as of Jan. 1 shrank to a 61-year low after the most-severe drought since the 1930s, according to the USDA. Midwest corn output withered, sending the price of the main ingredient in feed to an all-time high in August, and cattle futures rose to a record in January.

“Economically, we use price to ration or to increase supply,” says Swanson. “Our supply is that much more constrained.”

The cost of wholesale and retail beef and cattle futures will extend rallies to records amid constrained supplies, Minneapolis-based Swanson says. Feedlots still have made “aggressive” bids for animals, squeezing margins, he says.

Cattle prices rose to a record $1.35/lb. on the Chicago Mercantile Exchange on Jan. 11. In 2012, futures climbed 8.9%, the fourth straight increase.

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Discuss this Article 3

Anonymous (not verified)
on Feb 7, 2013

High feed costs are definitely of concern for everyone raising livestock. Using alternative feed rations can slow the flow. Another problem surfacing in our area is theft of feedlot animals as they approach market weight. Having grown up in South Dakota where branding protects the livestock property rights of the people raising the animal, it's hard for me to understand why permanent forms of ID are not required nation-wide. It's also of great concern that very little is being done by law enforcement to try to stop cattle rustling rings. It seems to be up to the cattle owner to solve his own problems. When someone is caught stealing, who should check cell phone records and bank accounts to follow a money trail or determine who's working with him? Does anyone have any idea how a feedlot owner can continue to stay in business while bleeding due to high feed costs AND theft???

Anonymous (not verified)
on Feb 8, 2013

Here in Texas we have Texas & Southwestern Cattle Raisers Association Special Rangers that investigate cattle and equipment thefts. You might contact the main office and see if they can recommend procedures and sources of help in your area.

Anonymous (not verified)
on Feb 13, 2013

Thanks for your help! I looked up the number and passed it on to the victims. Their losses are staggering. They've contacted the local law enforcement, state police, attorney general's office, FBI, our rep and senator in Washington, DC among others. So far no one is doing anything. I can't imagine why someone isn't checking out this thief's bank account and cell phone records at the least in an effort to see who's aiding and abetting. Haven't talked to them today, but last I heard, they were sent to an answering machine at the Fort Worth headquarters. I appreciate your input.

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