The cattle industry is ready to set records for high prices this year and next. While this is positive news for finished cattle prices, calves and feeder cattle still face the price-depressing burden of high feed costs. In the longer-run, current high feed prices will keep the industry in a liquidation phase and smaller beef supplies in coming years will be positive for returns for years to come.

The cattle industry continues to adjust to high feed prices not only from the last three years, but also from the most recent increases in corn, distillers, and soybean meal costs. The longer-term adjustments continue to play out in the reduction of cow numbers. The most recent surge in feed prices will likely keep producers from expanding until feed prices moderate. That will not be until the 2011 U.S. crops are assured, which is still at least 10 months away. This means cow numbers will not likely expand until 2012 and that beef supplies will not start to grow until 2014.

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