The bottom line is that fed cattle prices have held up.
Here is a puzzle for you. Take a large number of Canadian cattle entering the U.S. Add in a dismal wheat crop that provides poor winter pasture. Blend that with $5.50 corn prices. Can you find anyone smiling in this picture?
Ironically, the scenario is not as bad as those facts would seem. What is missing in that picture is the fact that lightweight feeder calves entering feedlots have been selling at a respectable price, says USDA livestock economist Rachel Johnson. Her December livestock report from USDA's Economic Research Service says cow slaughter continues to exceed the rate of last year, and is currently 4% above December 2009. Certainly, some of the volume comes from U.S. beef herds, but Canadian cows have also contributed to the slaughter rate.
Johnson says feeder calves declined in number by 4% over the past year, and that is substantiated by the lower number of calves entering feedlots. However, there are 21% fewer calves wandering in pastures currently, a result of the increased number of beef cows being slaughtered. Johnson says 2011 is going to bring fewer feedlot placements, and those placements will be at lighter weights than in the past two years. She says, “At some point in 2011, the tight supplies of feeder cattle should begin to adversely affect placements and subsequent marketing of fed steers and heifers.”
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