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July 22nd, 2014 07:02 p.m.


Agribiz: Cold weather influencing cattle market

POSTED: January 15, 2014 9:38 p.m.

The deep freeze we all experienced resulted in more than just frozen pipes.

Cattle in the Midwest needed extra care to make it through the arctic blast. Extra feed and hay had to be used just so they could maintain body temperature. Extra costs on top of a low cattle inventory is not what cattlemen want right now.

The deep freeze that swept across the U.S. last week, disrupting travel and boosting fuel use, is compounding stress on a shrinking domestic beef industry already struggling with high costs and weather shocks. While crops from oranges to winter wheat avoided major damage, the cold slowed the growth of livestock and extended a rally in Chicago cattle futures to a record, signaling higher beef costs for restaurants including McDonald’s Corp. and Texas Roadhouse Inc.

The U.S. cattle herd contracted for six straight years to the smallest since 1952, government data show. A record drought in 2011 destroyed pastures in Texas, the top-producing state, followed the next year by a surge in feed-grain prices during the worst Midwest dry spell since the 1930s. Fewer cattle will mean production in the $85 billion beef industry drops to a 20-year low in 2014, the U.S. Department of Agriculture said.

Cattle futures rallied 13 percent since the end of June and reached $1.381 a pound Tuesday, the highest since trading began on the Chicago Mercantile Exchange in 1964. The Standard & Poor’s GSCI gauge of 24 raw materials slipped 0.2 percent in the period, and the MSCI All-Country World Index of equities rose 14 percent.

Commercial beef output in the U.S. may drop 5.4 percent this year to 24.32 billion pounds, the lowest since 1994, the USDA said Friday. The herd reached a 61-year low of 89.3 million head as of Jan. 1. The agency will update its estimate on Jan. 31.

The number of cattle in American feedlots was the second lowest on record on Dec. 1, government data showed. While corn dropped 49 percent since reaching a record $8.49 a bushel in August 2012, prices are still 25 percent higher than the average of the past two decades. Use of the grain in livestock feed will jump 22 percent this year, the USDA forecasts.

Even as domestic beef demand drops, global consumption this year will be the highest since 2008 as higher incomes allow people in emerging economies to afford more protein, according to the USDA. U.S. exports totaled 2.36 billion pounds in the 11 months through Nov. 30, up 4.4 percent from the same period a year earlier, according to the latest government data. Japan, Canada and Mexico were the biggest buyers.

Source: Bloomberg.com, Elizabeth Campbell

Michael Wheeler is county extension coordinator for the UGA Cooperative Extension in Hall County. You can contact him at 770-535-8293, www.hallcounty.org/extension. His column appears biweekly on Thursday’s Business page and at gainesvilletimes.com.


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