Over-supply in US cattle business?

By Joanna Levin

THE latest survey of US feedlot activity is mildly bullish for the cattle market, but many analysts remain cautious. The number of cattle in feedlots at the beginning of this month was 8.3 million head, 2% less than the population a year ago, according to the US Department of Agriculture seven-state survey.

At first glance, this would suggest that the industry is working through its backlog of cattle. But the number of feeder cattle actually rose year-on-year for the first time since September, climbing 5% from May 1997 to 1.36m head.

The only way to avoid exacerbating the oversupply in the feedlots will be to step up the slaughter rate. The latest figures show marketings were down 2% from a year earlier at 1.6m head.

Around the market, prices were lower on the week. Packers dropped their bids for live cattle to 63¢/lb on yesterday (19 May) from 66¢ ten days ago. This depressed futures prices, with the Chicago August feeder cattle contract closing at 76.07¢/lb, compared with less than 78.50¢/lb at the start of last week.

The boxed beef market has eased off slightly on improved supply, but is expected to recover over Memorial Day weekend, 23-25 May. The choice grade cut-out for 550-700lb animals closed down a cent on the week on Friday, 15 May at 102.5¢/lb.