US ranchers are increasingly moving cattle into feedlots as expanding drought conditions devastate pasture in some states.
That’s likely to lead to a surplus of beef once the cattle reach market weight, typically in four to six months. Consumers and restaurants should benefit from lower beef prices, although profit margins for beef processors could get squeezed. After that, however, beef prices could then rebound as feedlot populations drop.
Cattle and calves on feed for the slaughter market totaled 11.234 million head as of Sept. 1, up 1.4% from a month earlier and the second highest reading for that date since the data series began 25 years ago, the USDA reported recently. By comparison, over the past decade feedlot populations have declined 0.2% on average between August and September, a Gro analysis shows.
New placements in feedlots also jumped, especially in states hit hard by drought, as shown via the Gro Drought Index. Placements were greatest in Nebraska, up 11% year over year, and in Colorado, up 17%. Nationally, placements rose 2% from last year to 2.1 million head.
By weight, new feeder placements were skewed to heavier animals — placements of cattle weighing over 900 pounds were up 15.4% from a year earlier. That could mean beef surpluses, and downward pressure on beef prices, could begin in as soon as three months, as the larger animals reach market weight more quickly.
Feedlot populations vary seasonally, with increases in cattle on feed typically occurring from October through December. This year’s widespread drought has accelerated that trend, as ranchers are forced to decide how best to manage their herds to avoid or curtail losses.
Beef primal composite prices have slumped 16% from their recent peak in late August, for choice cuts. And the live cattle December contract, which had been rising steadily through the year, dropped on Friday to its lowest level since April.
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