Fattest-Ever U.S. Cattle Herd Signals End to Record Beef Prices
Chicago — Cattle in the U.S. are now the fattest they’ve ever been, signaling an end to the seven-year run of record beef prices just as losses begin to mount for American feedlot owners.
Tom Fanning, who manages a feedlot herd of 30,000 in Buffalo, Okla., said he loses $100 to $300 on each animal he sells to slaughtering plants, even though they are bigger and produce more meat than ever. Its worse for other producers. On average, industry losses began in December and ballooned to $420 a head last month, the Livestock Marketing Information Center estimates.
Cattle futures have plunged 23 percent from an all-time high a year ago as the U.S. herd began a long-awaited expansion and consumers switched to cheaper chicken and pork. That’s squeezed feedlot owners who buy year-old steers and raise them on a diet of mostly corn for more than four months. To ease the pain, operators like Fanning are taking advantage of ample, low-cost grain supplies by holding cattle for almost a month longer than normal, which means the animals get bigger and generate more revenue.
“It still makes economic sense to put on as many pounds as efficiently as you can” to minimize losses, said Fanning, 50, who has been managing Buffalo Feeders LLC for 15 years. His cattle spend about 150 days eating grain before they are sold, about 25 days more than two years ago, adding about four pounds of weight gain per day, he said.
On average in October, t he animals weighed 1,390 pounds when sold to beef processors, an all-time high, U.S. Department of Agriculture data show. The 2.6 percent increase over a year earlier was the biggest annual gain in more than a decade. Heavier cattle are helping to boost domestic beef supplies, which had tumbled and sent retail prices soaring. On Nov. 10, the USDA forecast fourth-quarter production will rise 1.8 percent from a year earlier and that output in 2016 will increase 4.8 percent to 24.85 billion pounds, the first gain in six years.
The U.S. cattle herd had shrunk to the smallest since 1952 after a 2012 drought parched pastures and sent corn futures surging to a record. Spurred by the jump in beef, ranchers are showing signs of rebuilding their inventory. The herd on July 1 was 98.4 million head, up 2 percent from a year earlier and the first increase for that time of year since 2006, the USDA reported on July 25. As of Nov. 1, feedlots held more animals for that time of year since 2012 and were growing at the fastest rate in four years, government data show.
Prospects for more supply are reducing costs for consumers. Wholesale-beef prices have dropped 23 percent from a record in May and on Monday closed at $2.0279 a pound, a 22-month low, USDA data show. Retail ground-beef has dropped for four straight months, the longest slide in five years, to $4.083 a pound, compared with an all-time high of $4.238 in February, according to the Bureau of Labor Statistics.
Tyson Foods Inc., the largest U.S. meat processor, said Nov. 23 that a plunge in cattle prices eroded earnings by $70 million in the fiscal fourth quarter ended Oct. 3.