By Joanna Newman

US cattle prices dipped at the start of this week and then recovered in a mixed reaction to Fridays release of the latest monthly Cattle on Feed report.

The Chicago February live cattle futures contract settled yesterday (22 December) at 58.65¢/lb, up 0.55¢ from Monday but down from around 59¢ late last week.

During November, only 1.45 million head of finished cattle left feedlots for slaughter in the main seven cattle states, up just 1% from November last year. The industry had expected a 3% increase and the lower figure is bearish for prices. There are now concerns that producers need to be more aggressive in marketing cattle in order to avoid a bottleneck in supply.

On the other hand, there was a greater than expected drop in the number of store cattle placed in feedlots for fattening. A 6% decline from last year to 1.73 million head, compared with forecasts of only a 3% decrease.

This weeks freezing weather is also supporting the market. The recent cold snap is slowing down the rate of weight gain for stores, which will cut back future supply.

While US cattle producers have not suffered to the same extent as pig operators in 1998, this has still been a year of hardship for cattlemen. A 10% rally during the first four months of the year to 70¢/lb proved short-lived.

By August, prices had slid to their lowest point since mid-1996 at 58¢/lb and despite a subsequent bounce now look set to end the year at that level.

The disaster in the pig industry doubtless took its toll on US cattle and beef prices. Meanwhile a drop in export demand due to economic turbulence and currency swings further hurt the domestic cattle market.

Persistent high inventory levels in American feedlots and heavy slaughter weights are characteristic of this cyclical downturn.

Faced with low cash values and the availability of cheap feed due to the collapse in the grain markets, many US producers have preferred to hold on to loss-making herds in the hope of better margins. This in turn has delayed a market recovery.

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