Cattle numbers going down, beef prices up

The latest data from the U.S. Department of Agriculture (USDA) on activity in the nation's cattle feedlots showed more cattle sold than projected to packers, with slower refilling of feedlot pens after cattle were sold. This means beef prices will be rising, as fewer head of cattle will be available later in 2008 and particularly in 2009, analysts said.

This is a function of drought cutting cow numbers and the calf crop, slowing replacements, higher prices for corn and the tearing up of pastures to plant corn to take advantage of the high prices. In 2008, pork and chicken supplies will be ample to make up for any beef shortage, but both may decline in numbers in 2009, due to high corn prices, analysts said.

High corn prices are having another effect at the feedlots, grain analysts said, as winter wheat is expected to be cheaper to feed than corn. This means more wheat in the feedlot ration and less corn. Early bookings of wheat indicate greater use of it in animal feed, which will mean less going into flour for baked goods and human consumptiion.

The higher corn prices are due, of course, to ethanol production bidding up the price of the corn crop, and causing cattlemen to seek cheaper alternatives. This could also increase the price of flour, as wheat is being diverted to livestock production.

This was predicted recently on this blog, and is now confirmed by the early data emanating from the feedlots and the grain elevators. Stay tuned.