Surplus fat cattle hit USA producer prices

By Joanna Levin

EVERYONE along the cattle supply chain seems to be losing money these days. US feedlots, where cattle are fattened ready for the packing house, have been unprofitable since last fall, with losses averaging $100-150/head.

A severe surplus of fat cattle in the feedlots ready for slaughter means producers are suffering. Fat cattle supplies on March 1 were 23% higher than the average for the past five years, but last month owners shipped 3% fewer fat cattle to the packing houses than a year earlier.

However, some bullish traders estimate that the situation has bottomed out. They believe that packing house orders will start to pick up, freeing up space in the feedlots and raising demand for feeder cattle. This sentiment contributed to a small rally in prices last week.

May feeder cattle prices – which tend to move in inverse relation to the corn price – rallied to close on Friday April 3 at 76.525¢/lb (46p/lb), compared with 73.8 cents/lb a week earlier. But beef prices dropped last week as packers sought to shift inventory. Feeder cattle prices and last weeks drop in the grain market helped

The Asian economic crisis continues to hurt US beef exports, especially to Japan and Korea. The depreciation in the Korean Won has caused a sharp reduction in hide exports to this major destination from 40% of total exports to 34%.