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Smallest cattle herd in 40 years means costly beef

Published July 30, 2014 5:29 pm

Agriculture • Ten straight days of price increases is the longest rally in 37 years.
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Chicago • Feeder-cattle futures rose, heading for the longest rally in 37 years, with the smallest total for the U.S. herd in four decades signaling higher beef costs.

Cattle inventories as of July 1 fell to the lowest for the date since records began in 1973, the Department of Agriculture data said last week. Gains in consumer spending helped the economy rebound more than forecast in the second quarter, according to government figures Wednesday. Retail ground beef and boneless sirloin-steak costs rose to all-time highs in June, Bureau of Labor Statistics data show.

"We've never had cattle supplies this tight before with this kind of beef demand," said Troy Vetterkind, owner of Vetterkind Cattle Brokerage in Thorp, Wisc. "At some point in time, we're going to cool things off, but it doesn't appear to be this week. It's a historic thing that we'll probably never see ever again."

Feeder-cattle futures for August settlement headed for the 10th straight advance, the longest rally since March 22, 1977. This year, wholesale beef has surged 31 percent to a record $2.6303 a pound.

Placements of cattle into feedlots in June trailed year- earlier levels for the fourth straight month, USDA data showed. In 2014, the slaughter of animals as of July 26 dropped 6.9 percent from a year earlier.

Pasture conditions improved in the week ended June 27 with 52 percent in good or excellent condition, up from 44 percent in 2013, the USDA said this week. That spurs producers to let cattle graze for longer periods, instead of sending them to feedlots, Vetterkind said. Ranchers are also retaining heifers to rebuild herds, adding to tight supplies, he said.

Feedlot operators typically buy year-old cattle that weigh about 500 pounds (227 kilograms) to 800 pounds, called feeders. The animals are fattened on corn until they weigh about 1,300 pounds, when they are sold to meatpackers.

This week, live steers sold for $1.62 a pound on average, up from $1.57 last week, the USDA said.

"The cash market is on fire with no signs of letting up," contributing to the futures rally, Lannie Cohen, the president of Capitol Commodity Services Inc. in Indianapolis, said in a telephone interview.

Cattle futures for October delivery rose 0.4 percent to $1.59725 a pound.

Hog futures for October settlement fell 2.6 percent to $1.03325 a pound. Earlier, the price fell by the exchange limit of 3 cents to $1.03075, the lowest since Feb. 27.




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